Such transmission of shocks is not only from developed economies to emerging economies, but also vice versa. Asset prices, in particular, stock prices, are closely correlated both globally and regionally. It should be noted that, in such circumstances, asset prices tend to overshoot economic fundamentals from time to time, causing excessive volatility, which could in turn negatively affect the developments in the real economy.
The importance of a timely policy response is particularly evident. The size and rapidity of the fiscal and monetary policy responses have been unprecedented. The fiscal stimulus provided has been the largest outside wartime in many countries.