The paper extends the GEMMES prototype model in order to assess the effectiveness of various monetary policy and central bank interventions, in insulating a small-open economy from shocks associated with appreciation induced boom-bust episodes, caused by portfolio and cross—border lending flows. We find that active interest-rate setting monetary policy has only limited ability to insulate the economy from the appreciation boom-bust episode. The Standard Taylor Rule performs worse than pure inflation targeting, owning to its adverse distributional effects on aggregate demand and the prolonged arbitrage window. An Open Economy Augmented Taylor Rule mitigates the appreciation episode at the expense of following the interest-rate setting monetary policy of the financial North, in line with the well-known Dilemma. A monetary policy that combines the Pasinetti index and FX intervention policies effectively prevents the boom-bust episode by cutting all transmission channels at the beginning. The Pasinetti index cancels the adverse distributional effects of interest-rate setting monetary policy and sterilisation neutralises the effects of intervention at the expense of increasing the length of the cycle.