These conditions are in turn more likely to be present if a country lacks a politically strong middle class and/or a sufficiently independent central bank 3 . As Balcerowicz remarks, in a world of financial liberalization the traditional distinction between domestic and foreign debt may not be that useful in explaining governments’ willingness to pay.
This suggests that despite the fact that equity and debt are two different classes driven largely by growth premium and yield differentials, both were affected by shifts in broad sentiment towards EMEs (Chart 1). 2  Fratzscher, M., LoDuca, M., & Straub, R. (2013), “On the International Spillovers of US Quantitative Easing”, Discussion Papers 1304, German Institute for Economic Research.