Emerging Market Economies Essay Example

Emerging market economies are countries that are not established financially but whose economies are fast developing into a strong market economy. The ability and the capacity for these countries to expand is higher than for the developed countries (Priewe, 2019).

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The income per head is low considering the underutilization of existing resources and rampant unemployment rate. Second is the size of the economy is lower considering the lower GDP. The third is increasing interest from investors and other developed economies due to the availability of unexploited resources and presence of non-stringent government policies. The trade deficit is stabilizing due to transitioning from over-reliance on agricultural products and export of raw materials. The fourth is the restricted market freedom due to high exchange rate risks and volatile market currencies (Ioana, Cristina & Gheorghe, 2014). Economic stability is prone to the effects of natural disasters and political aspects and commodity swings. Also, there is the availability of cheap labor which is a cost saving for the investors.

The pace of growth in these economies is higher than developed counterparts due to industrialization and infrastructure development. These attract foreign investment, rising employment rate, reduction in trade deficit due to an increase in exports of processed raw materials which catapults their growth higher and capital expansion. Also, in these markets, the government through fair business policies, i.e., under taxation, security et cetera enables a create a favorable environment for these investments to thrive (Shah, 1994).

Conclusion

In conclusion, despite rapid growth in EMs, their capital markets are not mature making initial capital investment higher. However, the return for investors is higher than average making it attractive for investment.

References

Coulibaly, B. (2012). Monetary Policy in Emerging Market Economies: What Lessons from the Global Financial Crisis?. SSRN Electronic Journal.

Devereux, M. B., Lane, P. R., & Xu, J. (2006). Exchange rates and monetary policy in emerging market economies. The Economic Journal, 116(511), 478-506.

Eichengreen, B., & Hausmann, R. (Eds.). (2010). Other people's money: debt denomination and financial instability in emerging market economies. University of Chicago Press.

Ioana-Cristina, S., & Gheorghe, C. (2014). Characteristics of the Emerging Market Economies-BRICS, from the perspective of Stock Exchange Markets. THE ANNALS OF THE UNIVERSITY OF ORADEA, 39.

Priewe, J. (2019). [online] Available at: https://www.researchgate.net/profile/Jan_Priewe/publication/267825163_What_really_are_the_Emerging_Market_Economies/links/551be1430cf20d5fbde21d36.pdf?inViewer=true&pdfJsDownload=true&disableCoverPage=true&origin=publication_detail [Accessed 27 Feb. 2019].

Shah, A. (1994). The reform of intergovernmental fiscal relations in developing and emerging market economies. The World Bank.