Such risk can be elevated and financial instability triggered by several factors: shocks related to weak domestic institutions and policies, swings in world commodity prices, contagion from other emerging markets, and, turmoil originating in the industrial countries.
2 Developing economies have made great strides over the past decade to improve economic fundamentals and policymaking, such as strengthening the independence and credibility of their central banks. Many of these countries have reaped the rewards of their labors during the most recent period of market turmoil, as volatility in their domestic financial markets was reasonably contained. However, room for improvement remains.