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Over the past two decades, most emerging market economies witnessed two key developments. A marked process of financial integration with the rest of the world, arguably turning these economies more vulnerable to global financial shocks; and an improvement of macroeconomic fundamentals, helping to increase their resiliency to these shocks. Against a backdrop of these opposing forces, are these economies more vulnerable to global financial shocks today than in the past? Have better fundamentals offset increasing financial integration? If so, what fundamentals matter most? We address these questions by examining the role of these two forces over the past two decades in amplifying or buffering the economic impact of these shocks. Our findings show that EMEs, with the exception of Emerging Europe, have become less vulnerable. Exchange rate flexibility and external sustainability are key determinants of the impact of these shocks, while the extent to which deeper financial integration is a source of vulnerability depends on the exchange rate regime.

Management --- Business & Economics --- Management Styles & Communication --- Financial risk. --- Financial crises. --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Business risk (Finance) --- Money risk (Finance) --- Crises --- Risk --- Financial crises --- Capital movements --- Foreign exchange administration --- Econometric models --- E-books --- Foreign exchange --- Capital flight --- Capital flows --- Capital inflow --- Capital outflow --- Flight of capital --- Flow of capital --- Movements of capital --- Balance of payments --- International finance --- Exports and Imports --- Finance: General --- Foreign Exchange --- Financial Markets and the Macroeconomy --- Financial Aspects of Economic Integration --- International Business Cycles --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- General Financial Markets: General (includes Measurement and Data) --- International Investment --- Long-term Capital Movements --- International Lending and Debt Problems --- Finance --- Currency --- International economics --- Financial integration --- Exchange rate flexibility --- Emerging and frontier financial markets --- Foreign assets --- External debt --- Financial markets --- External position --- Financial services industry --- Investments, Foreign --- Debts, External --- Greece