Four possible effects can be identified. First, because they are undergoing significant structural change, many emerging market economies may be more vulnerable to shocks than fully-developed economies. Of course, all economies experience shocks, but the frequency and scale may be greater in emerging market economies.
These shocks can have their origin in the domestic economy (a poor crop) or arrive unexpectedly from overseas (higher oil prices). Either way, they are difficult enough to handle if they impact on the demand side, but more often the emerging market central banker has to grapple with sharp movements in cost pressures on the supply side.