The yield differential between corporate bonds is explained predominantly by the rating and by common, maturity and coupon effects, whereby the yield variance explained by the country of issuance is close to zero. One measure for the integration of equity markets is the cross-sectional dispersion of the country and sector returns.
One may argue that EMEs where inflation is well under control should therefore not hesitate to use the policy space available to them to address the downside risks to growth. But the reality is far more complicated than it appears. There is substantial tail risk associated with the euro area debt crisis, which if it materializes could wreak havoc on EMEs.