The world is expecting the US Federal Reserve to start tapering its quantitative easing programme soon. This has increased market volatility. And, as in past episodes of Fed tightening, emerging markets are at the centre of the turmoil. But this time the adjustments taking place are the product of imbalances that originated in the developed world.

Since 2010, advanced economies’ unconventional monetary policies have fuelled unprecedented capital flows into emerging markets, reaching $1tn a year. This generated unsustainable credit growth, raised asset prices and worsened several recipient countries’ vulnerability.

When the Fed signalled the forthcoming end of QE, emerging markets became the focus of financial distress. This creates a challenge for them – and policy makers must go beyond temporary measures to defend currencies and stem capital outflows. Exposed countries must move fast to recover their balance, to reassure markets of their long-term stability and to accelerate structural reforms to increase productivity growth.