Analysis shows they are reliant on market investors such as hedge funds, which contributed $4tn last year
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Emerging economies are at greater risk of higher interest rates and currency shocks as a result of the Iran war because of increased reliance on market investors such as hedge funds, the International Monetary Fund has warned.
The IMF’s analysis shows that a cumulative $4tn flowed into emerging markets last year from outside the formal banking sector – including from hedge funds and investment funds.
In a blogpost, IMF economists argue that this can bring benefits, but also risks, as these funds are more likely than traditional bank financing to be withdrawn suddenly in times of financial stress.
