September 24, 2018

The turmoil in various emerging market economies has rattled global markets in recent weeks and comes at a precarious time for developing economies around the world, investors have started to cast doubt on how long the current period of synchronized global growth can last. The turmoil also paints a bull’s-eye on the weakest countries. The year’s selective emerging-market panics are a sign that as liquidity becomes scarcer, developing countries will have to work harder to attract capital. All of which should be a warning for countries to use this moment to shape up. Our analysis suggests a simple way to identify those who are likely to whether the storm and those likely to suffer. Investors need to focus on serious proposals about economic policy initiatives such as spending restraint, debt reduction, tax reform and trade liberalization. A clear monetary policy focused on monetary stability rather than financing profligate spending is what is needed. A focus on the policy mix will allow the investors to separate the winners from the losers and who would recover faster from a speculative attack and or a crisis.

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