I have sketched the Indian situation in some detail but what we had experienced here was typical of most EMEs, save for some differences in the degree of impact. The short point is that the crisis resulted in a dissipation of the euphoria over decoupling. 13. So, have EMEs decoupled from the advanced economies? The new answer to this old question is quite nuanced.
Their good position is in part thanks to the post-financial-crisis reform agenda including the build-up of more robust buffers. But also because banks have been shielded from large losses due to low insolvency rates. And low insolvency rates, as we have seen, are in turn induced by support measures, such as government guarantees on bank lending.