Decoupled and resilient? The changing role of emerging market economies in an interconnected world

For the last two or three decades, the global economy has been going through an extraordinary transition phase. This period has been marked by stronger integration among economies, fuelled by falling trade and communication costs, but above all by the rising prominence of emerging market and developing economies (EMDE), which as a group have enjoyed persistently higher growth than advanced economies (AE) and have shown greater resilience than in the past. This performance has to a large extent resulted from the use of better policy frameworks and institutions as well as the ability to implement counter-cyclical economic policies. While EMDEs were certainly not spared from the 2008/2009 global financial crisis, these features have helped them to limit its adverse impact and handle the crisis better than similar events in the past. Furthermore, and despite some regional exceptions, EMDEs generally bounced back more rapidly and vigorously from the great recession than AEs. The article shows how EMDEs’ growing weight in the global economy and the multiplication of their connections with other parts of the world have reshaped the global economic landscape. It illustrates how the one-directional influence of AEs on EMDEs’ business cycles has gradually diminished. While this does not imply full decoupling, it nevertheless suggests that the interdependence between EMDEs and AEs is becoming increasingly two-sided.