Global shocks drive half of emerging market financial conditions, impacting economies.
The article examines how global factors impact financial conditions in emerging market economies. It identifies four main global shocks that affect risky asset prices in these economies. These global factors explain about half of the changes in asset prices. However, the influence of global shocks on interest rates and currencies in emerging markets is smaller, suggesting that other factors may be more important. While US monetary policy does have some impact on emerging market financial markets, the overall global environment has a stronger influence.