The global financial crisis originated in the US and then spread to Europe. While the global growth has recovered from the trough of 2009, Europe has lapsed into recession again. The continuing uncertainty in the euro area poses a major risk to the global economy today.
It has affected the growth prospects of both advanced and emerging market economies through trade, financial and confidence channels. Given the interconnectedness of global financial markets, the principal risk to emerging markets and developing countries (EMDEs) arise from ‘risk on’ and ‘risk off’ behaviour of global financial market.