In two of the pre-released chapters of the IMF’s upcoming financial stability report (the full report will be released on April 13), emerging market spillover risk is highlighted as one of the agency’s chief concerns in moving forward. It is noted that over a third of changes in asset prices, exchange rates and equity flows can be attributed to shocks from emerging markets and China in particular. This contagion effect risk is rising as emerging markets’ financial systems become far more integrated and connected into the global economy. This risk is held both directly through financial markets, and indirectly through sector specific business relations.
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