Beyond a certain threshold, however, they act as amplifiers, generating broad and unpredictable default cascades – an extreme form of systemic risk. Once again, the appeal of this story is immediate when thinking about our recent history: increasingly complex financial networks seemed to deliver greater stability for a long while, until Lehman – a large shock – came along.
Given the globalised nature of EMEs – South Africa included – this implies that international influences, although of an exogenous nature, will form an integral part of the policy landscape in emerging economies. Global inflation pressures remain subdued with both current and projected inflation rates below target in most advanced economies.