Emerging Market Resilience: Good Luck or Good Policies?
IMF Working Papers, December 5, 2025
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Bibliographic details
- Authors: Marijn A. Bolhuis, Francesco Grigoli, Marcin Kolasa, Roland Meeks, Andrea F Presbitero, Zhao Zhang
- Published: December 5, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229033886.001
Summary of main findings
- Emerging markets have shown remarkable resilience during risk-off episodes in recent years.
- Favorable external conditions ("good luck") contributed to this resilience.
- Improvements in policy frameworks ("good policies") played a critical role in bolstering capacity to withstand adverse consequences of risk-off events.
- Improvements in monetary policy implementation and credibility have reduced reliance on foreign exchange (FX) interventions and capital flow management measures.
- Stricter macroprudential regulation also contributed to less FX interventions.
- Central banks have become less sensitive to fiscal interference and hold sway over domestic borrowing conditions.
- Countries with robust frameworks face easier policy trade-offs and are better positioned to navigate risk-off episodes.
- Economies with weaker frameworks risk de-anchoring inflation expectations and larger output losses if monetary tightening is delayed, especially when persistent price pressures emerge.
- In settings with weaker frameworks, FX interventions offer only temporary relief and are less necessary when policy frameworks are sound.
Policy implications and recommendations
- Strengthen monetary policy implementation and credibility to reduce dependence on FX interventions and capital flow management measures.
- Reinforce macroprudential regulation to lower the need for FX interventions during stress episodes.
- Enhance central bank independence and resistance to fiscal interference to maintain control over domestic borrowing conditions.
- Prioritize prompt monetary tightening when persistent price pressures emerge to avoid de-anchoring inflation expectations and larger output losses.
- Recognize that FX interventions are temporary tools and are less effective in the absence of sound underlying policy frameworks.
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