Since early 2014, heightened volatility in international financial markets has hit emerging economies hard. In the year leading up to 5 March 2014, emerging economies saw about US$30 billion in equity outflows, which was twice as much as the total outflows for the whole of 2013 (Reuters, 2014a and 2014b).1 This latest turmoil occurred only a few months after emerging economies were battered by sudden capital reversals, caused by the Chair of the United States Federal Reserve hinting (in May 2013) that the Federal Reserve would begin reducing quantitative easing. This has come as a surprise to many observers and analysts who had, since the financial crisis of 2008, suggested that emerging economies had “decoupled” from trends and policies in advanced economies. The worry now is that having missed the warning signs, emerging economies will be on the receiving end of the wrong diagnosis if there is a more dramatic turn for the worse, with inappropriate

remedies likely to follow.