Recent developments in Turkey provide a clear illustration of the nature of emerging risk

Recent developments in Turkey have been drastic , but reveal the nature of emerging risk , which is also present in other large emerging countries ( Brazil , India , South Africa , Indonesia ). These emerging countries suffer from a shortfall of savings , which leads to a chronic external deficit , exacerbated in the countries with sizeable energy imports. As a result , interruptions to capital inflows trigger currency crises (balance-of- payments crises). This leads to exchange-rate depreciation and drives up inflation and interest rates, resulting in a loss of growth which exacer b ates the capital outflows . Capital inflows can grind to a halt as a result of economic factors (excessive external debt , loss of growth , higher dollar interest rates ) and also political factors (political tensions between the country and the rest of the world, risks to the independence of its central bank, etc.).