That time the resilience of the EMs’ domestic financial sectors to adverse shocks, along with the liquidity provided by systemically important central banks, proved to be crucial to financial market stabilization.
In contrast to a monetary policy response to previous crises when most EM CBs increased interest rates to avoid sharp exchange rate depreciations, last year they were able to cut their rates almost immediately. This reflects a higher degree of credibility gained by the central banks, as well as well-anchored inflation expectations.