Emerging market economy: Difference between revisions
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'''Emerging economies''' are middle-income countries (higher incomes than least developed countries and lower incomes than OECD countries), economic openness to the world, large-scale structural and institutional change, and potential for strong growth characterized by gender. Sometimes referred to as "emerging markets" (the name implies a '''political approach''') or "emerging markets" (whose approach is '''commercial'''). | '''Emerging economies''' are middle-income countries (higher incomes than least developed countries and lower incomes than OECD countries), economic openness to the world, large-scale structural and institutional change, and potential for strong growth characterized by gender. Sometimes referred to as "emerging markets" (the name implies a '''political approach''') or "emerging markets" (whose approach is '''commercial'''). | ||
This '''emergence''' means that the populations of these countries have gradually caught up with the standard of living in the West, but the differences between these countries and the developed regions are still large, and recent growth has contributed to the structure of these economies. The 2008-2009 crisis impacted emerging markets in many ways, exacerbating the vulnerabilities of some emerging markets, particularly their reliance on changes in capital flows and commodity prices. embossed. | This '''emergence''' means that the populations of these countries have gradually caught up with the [[standard]] of living in the West, but the differences between these countries and the developed regions are still large, and recent growth has contributed to the structure of these economies. The 2008-2009 crisis impacted emerging markets in many ways, exacerbating the vulnerabilities of some emerging markets, particularly their reliance on changes in [[capital flows]] and commodity prices. embossed. | ||
It should be noted that GDP per capita is only a partial (and partial) threshold criterion <ref> Jagdish N. Sheth (2011), p166-167 </ref>. | It should be noted that GDP per capita is only a partial (and partial) threshold criterion <ref> Jagdish N. Sheth (2011), p166-167 </ref>. | ||
==Investments between emerging and developed economies== | ==[[Investments]] between emerging and developed economies== | ||
'''Foreign Direct Investment''' (OFDI) by Emerging Market Enterprises (EMEs) has become increasingly important and widespread in recent years. According to WIR (2008), OFDI in emerging and developing countries reached US$304 billion in 2007, an increase of 36.51% compared to 2006, reaching a record high. A few countries of origin make up the bulk of this OFDI, but companies from more and more countries are implementing OFDI to expand into '''global markets'''. For example, in 2005, foreign sales and foreign employment for the top 100 multinational companies in developing countries increased by 48% and 73%, respectively. | '''Foreign Direct [[Investment]]''' (OFDI) by Emerging [[Market]] Enterprises (EMEs) has become increasingly important and widespread in recent years. According to WIR (2008), OFDI in emerging and developing countries reached US$304 billion in 2007, an increase of 36.51% compared to 2006, reaching a record high. A few countries of origin make up the bulk of this OFDI, but companies from more and more countries are implementing OFDI to expand into '''global markets'''. For example, in 2005, foreign sales and foreign [[employment]] for the top 100 multinational companies in developing countries increased by 48% and 73%, respectively. | ||
These companies operate in a wider range of industries than the largest multinational corporations in developed countries and are actively involved in numerous cross-border '''mergers and acquisitions'''. This increase, in addition to the offshore availability of market opportunities, the entrepreneurial spirit of wanting to conquer major international markets, and the strategic intent to gain a competitive advantage in cost-effective mass, has led national governments to This is due to the rapid economic development and free market policies implemented by the manufacturing. The increase is also due in part to the increasingly '''favorable measures''' taken by the emerging market's own governments. Most emerging market governments (India, China, Brazil, etc.) are now encouraging local companies to go global. Similarly, researchers agree that home country institutional factors play an important role in shaping international expansion behavior and business development in emerging markets <ref> Yadong L., Quiuzhi X., Binjie H. (2010), p1-2 </ref>. | These companies operate in a wider range of industries than the largest multinational corporations in developed countries and are actively involved in numerous cross-border '''[[mergers and acquisitions]]'''. This increase, in addition to the offshore availability of market opportunities, the entrepreneurial spirit of wanting to conquer major international markets, and the [[strategic intent]] to gain a [[competitive advantage]] in [[cost]]-effective mass, has led national governments to This is due to the rapid economic development and free market policies implemented by the manufacturing. The increase is also due in part to the increasingly '''favorable measures''' taken by the emerging market's own governments. Most emerging market governments (India, China, Brazil, etc.) are now encouraging local companies to go global. Similarly, researchers agree that home country institutional factors play an important role in shaping international expansion [[behavior]] and business development in emerging markets <ref> Yadong L., Quiuzhi X., Binjie H. (2010), p1-2 </ref>. | ||
==Central bank role== | ==Central bank role== | ||
After the last global financial crisis, a lot of people have changed their way to see the '''role of macroeconomic policies''' in emerging and developed market economies. Now the central banks in emerging countries try to intervene in the foreign exchange markets but also to apply a discretionary monetary policy to target an '''inflation rate'''. | After the last [[global financial crisis]], a lot of people have changed their way to see the '''role of macroeconomic policies''' in emerging and developed market economies. Now the central banks in emerging countries try to intervene in the foreign exchange markets but also to apply a discretionary monetary policy to target an '''[[inflation]] rate'''. | ||
Given the well-known structural characteristics of emerging markets, well-intentioned ignoring of large exchange rate movements, even under an IT framework, is probably not the right policy. If two policy tools (policy rate and foreign exchange intervention) are available, they should be used together to achieve both price stability and exchange rate objectives. Provided central banks have sterilized intervention as a viable tool, stabilizing the exchange rate around its equilibrium value is consistent with meeting the inflation target. On the contrary, if a central bank has FX intervention in its toolbox, FX intervention will support the IT regime in the sense that it will benefit less from a switch to '''discretionary monetary''' policy. For example, in response to a volatile surge in capital inflows, central banks can cut interest rates and intervene in the foreign exchange market to limit appreciation. discretionary policy. | Given the well-known structural characteristics of emerging markets, well-intentioned ignoring of large exchange rate movements, even under an IT framework, is probably not the right policy. If two policy tools (policy rate and foreign exchange intervention) are available, they should be used together to achieve both [[price]] stability and exchange rate objectives. Provided central banks have sterilized intervention as a viable tool, stabilizing the exchange rate around its equilibrium value is consistent with meeting the [[inflation target]]. On the contrary, if a central bank has FX intervention in its toolbox, FX intervention will support the IT regime in the sense that it will benefit less from a switch to '''discretionary monetary''' policy. For example, in response to a volatile surge in capital inflows, central banks can cut [[interest]] rates and intervene in the foreign exchange market to limit appreciation. discretionary policy. | ||
Policy is not set in a vacuum, and '''central banks''' will inevitably be pressured to react if exchange rates deviate significantly from medium-term fundamentals, so currency intervention should complement '''inflation targeting'''. It may increase the credibility of banks inflation targets <ref> Atish R. Gosh, Jonathan D. Ostry, Marcos C. (2016), p1-3 </ref>. | Policy is not set in a vacuum, and '''central banks''' will inevitably be pressured to react if exchange rates deviate significantly from medium-term fundamentals, so currency intervention should complement '''inflation [[targeting]]'''. It may increase the credibility of banks inflation targets <ref> Atish R. Gosh, Jonathan D. Ostry, Marcos C. (2016), p1-3 </ref>. | ||
==Emerging market economy during a crisis== | ==Emerging market economy during a crisis== | ||
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* The interest of foreign investors | * The interest of foreign investors | ||
* The fact that some countries base their entire economy on certain resources (hydrocarbons,...) | * The fact that some countries base their entire economy on certain resources (hydrocarbons,...) | ||
* Fixed exchange rate | * [[Fixed exchange rate]] | ||
==Footnotes== | ==Footnotes== | ||
<references/> | <references/> | ||
== References == | {{infobox5|list1={{i5link|a=[[Currency Convertibility]]}} — {{i5link|a=[[Hegemony]]}} — {{i5link|a=[[Currency crisis]]}} — {{i5link|a=[[Etatism]]}} — {{i5link|a=[[Country risk]]}} — {{i5link|a=[[Price stability]]}} — {{i5link|a=[[Closed economy]]}} — {{i5link|a=[[Agribusiness]]}} — {{i5link|a=[[International division of labor]]}} }} | ||
* Atish R. Gosh, Jonathan D. Ostry, Marcos C. (2016) [https://doi.org/10.1016/j.jimonfin.2015.03.005''Two targets, two instruments: Monetary and exchange rate policies in emerging market economies''], Journal of International Money and Finance, USA | |||
* Jagdish N. Sheth (2011) [https://doi.org/10.1509/jmkg.75.4.166 '' Impact of Emerging Markets on Marketing: Rethinking Existing Perspectives and Practices ''], Journal of marketing, USA | ==References== | ||
* Atish R. Gosh, Jonathan D. Ostry, Marcos C. (2016) [https://doi.org/10.1016/j.jimonfin.2015.03.005''Two targets, two instruments: Monetary and exchange rate policies in emerging market economies''], Journal of International [[Money]] and Finance, USA | |||
* Jagdish N. Sheth (2011) [https://doi.org/10.1509/jmkg.75.4.166 '' Impact of Emerging Markets on Marketing: Rethinking Existing Perspectives and Practices ''], Journal of [[marketing]], USA | |||
* Olivier J., Hamid F., Mitali D., Kristin J., Linda L. (2010) [https://www.jstor.org/stable/40930485 ''The initial impact of the crisis on emerging market countries''], Brookings Papers on Economic Activity, USA. | * Olivier J., Hamid F., Mitali D., Kristin J., Linda L. (2010) [https://www.jstor.org/stable/40930485 ''The initial impact of the crisis on emerging market countries''], Brookings Papers on Economic Activity, USA. | ||
* Shaghil A., Zlate A., (2013) [https://doi.org/10.1016/j.jimonfin.2014.05.015''Capital flows to emerging market economies: A brave new world''], Journal of International Money and Finance, USA | * Shaghil A., Zlate A., (2013) [https://doi.org/10.1016/j.jimonfin.2014.05.015''Capital flows to emerging market economies: A brave new world''], Journal of International Money and Finance, USA | ||
* Yadong L., Quiuzhi X., Binjie H. (2010) [https://doi.org/10.1016/j.jwb.2009.04.003 ''How emerging market governments promote outward FDI: Experience from China''], Journal of World Business, USA. | * Yadong L., Quiuzhi X., Binjie H. (2010) [https://doi.org/10.1016/j.jwb.2009.04.003 ''How emerging market governments promote outward FDI: Experience from China''], Journal of World Business, USA. | ||
[[Category:Economics]] | [[Category:Economics]] | ||
{{a|SACRE Antoine}} | {{a|SACRE Antoine}} | ||
Latest revision as of 20:47, 17 November 2023
Emerging economies are middle-income countries (higher incomes than least developed countries and lower incomes than OECD countries), economic openness to the world, large-scale structural and institutional change, and potential for strong growth characterized by gender. Sometimes referred to as "emerging markets" (the name implies a political approach) or "emerging markets" (whose approach is commercial). This emergence means that the populations of these countries have gradually caught up with the standard of living in the West, but the differences between these countries and the developed regions are still large, and recent growth has contributed to the structure of these economies. The 2008-2009 crisis impacted emerging markets in many ways, exacerbating the vulnerabilities of some emerging markets, particularly their reliance on changes in capital flows and commodity prices. embossed. It should be noted that GDP per capita is only a partial (and partial) threshold criterion [1].
Investments between emerging and developed economies
Foreign Direct Investment (OFDI) by Emerging Market Enterprises (EMEs) has become increasingly important and widespread in recent years. According to WIR (2008), OFDI in emerging and developing countries reached US$304 billion in 2007, an increase of 36.51% compared to 2006, reaching a record high. A few countries of origin make up the bulk of this OFDI, but companies from more and more countries are implementing OFDI to expand into global markets. For example, in 2005, foreign sales and foreign employment for the top 100 multinational companies in developing countries increased by 48% and 73%, respectively. These companies operate in a wider range of industries than the largest multinational corporations in developed countries and are actively involved in numerous cross-border mergers and acquisitions. This increase, in addition to the offshore availability of market opportunities, the entrepreneurial spirit of wanting to conquer major international markets, and the strategic intent to gain a competitive advantage in cost-effective mass, has led national governments to This is due to the rapid economic development and free market policies implemented by the manufacturing. The increase is also due in part to the increasingly favorable measures taken by the emerging market's own governments. Most emerging market governments (India, China, Brazil, etc.) are now encouraging local companies to go global. Similarly, researchers agree that home country institutional factors play an important role in shaping international expansion behavior and business development in emerging markets [2].
Central bank role
After the last global financial crisis, a lot of people have changed their way to see the role of macroeconomic policies in emerging and developed market economies. Now the central banks in emerging countries try to intervene in the foreign exchange markets but also to apply a discretionary monetary policy to target an inflation rate. Given the well-known structural characteristics of emerging markets, well-intentioned ignoring of large exchange rate movements, even under an IT framework, is probably not the right policy. If two policy tools (policy rate and foreign exchange intervention) are available, they should be used together to achieve both price stability and exchange rate objectives. Provided central banks have sterilized intervention as a viable tool, stabilizing the exchange rate around its equilibrium value is consistent with meeting the inflation target. On the contrary, if a central bank has FX intervention in its toolbox, FX intervention will support the IT regime in the sense that it will benefit less from a switch to discretionary monetary policy. For example, in response to a volatile surge in capital inflows, central banks can cut interest rates and intervene in the foreign exchange market to limit appreciation. discretionary policy. Policy is not set in a vacuum, and central banks will inevitably be pressured to react if exchange rates deviate significantly from medium-term fundamentals, so currency intervention should complement inflation targeting. It may increase the credibility of banks inflation targets [3].
Emerging market economy during a crisis
Emerging market economies are not affected the same by crisis as developed economies. The mains issues that hit emerging countries is a big decrease in exports but also in capital outflows. It’s also very complex to use policy in that kind of situation. Different trade and financial risks, as well as different effects of shocks resulting from different growth performances of trading partners, explain much of the heterogeneity in each country's growth performance during the crisis. To better understand the difference between emerging and developed economies during a crisis, a comparison is needed. Next steps can be a real danger for emerging economies [4][5]:
- Structural weakness
- The interest of foreign investors
- The fact that some countries base their entire economy on certain resources (hydrocarbons,...)
- Fixed exchange rate
Footnotes
| Emerging market economy — recommended articles |
| Currency Convertibility — Hegemony — Currency crisis — Etatism — Country risk — Price stability — Closed economy — Agribusiness — International division of labor |
References
- Atish R. Gosh, Jonathan D. Ostry, Marcos C. (2016) Two targets, two instruments: Monetary and exchange rate policies in emerging market economies, Journal of International Money and Finance, USA
- Jagdish N. Sheth (2011) Impact of Emerging Markets on Marketing: Rethinking Existing Perspectives and Practices , Journal of marketing, USA
- Olivier J., Hamid F., Mitali D., Kristin J., Linda L. (2010) The initial impact of the crisis on emerging market countries, Brookings Papers on Economic Activity, USA.
- Shaghil A., Zlate A., (2013) Capital flows to emerging market economies: A brave new world, Journal of International Money and Finance, USA
- Yadong L., Quiuzhi X., Binjie H. (2010) How emerging market governments promote outward FDI: Experience from China, Journal of World Business, USA.
Author: SACRE Antoine
