New studies have shown a dual trend affecting both emerging economies and global finance. According to the IMF, the Global Financial Stability report found that changes in emerging market asset prices have explained over a third of the fluctuations in global equity prices and exchange rates.
First, it means that erratic difficulties in emerging economies have resulted in increased volatility worldwide. Second, the growing impact the emerging economies have on global finance means that they have developed further and that their influence rose accordingly.
Although emerging economies are a very diverse group – downturn in Brazil and Russia are larger than expected while India remains a bright spot – spillovers from emerging economies have increased in recent years, including from trade, commodities, and financial markets, IMF Managing Director Christine Lagarde explained.
Lagarde’s interpretation has been confirmed by World Bank’s economists in their latest paper Global Trade Watch: Trade Development in 2015. The authors found that while weak import demand was mostly concentrated in advanced economies in previous years, trade developments in 2015 can be traced to emerging economies, a news release said.