A major disadvantage for emerging countries

When comparing emerging countries (excluding China) with OECD countries, we see a major disadvantage for emerging countries: their inability to conduct a strong countercyclical economic policy. This is because: Fiscal deficits and public debt in emerging countries are limited by the low level of domestic savings that can be mobilised and by the impossibility of freely using external debt; Expansionary monetary policies in emerging countries have major drawbacks that they do not have in OECD countries: large capital outflows and sharp depreciation of the exchange rate, and therefore a decline in investment capacity and real income. Emerging countries can therefore react much less effectively to shocks than OECD countries.