What are the characteristics of an emerging market?
There are some specific characteristics of an emerging market country. In general, a nation that is emerging has lower than average income per individual, which drives rapid economic growth. To help incentivize their citizens, leaders of emerging markets are willing to undertake the steps needed to create change toward a more industrialized economy.
Many emerging markets are unstable and experience high volatility. Changes in the social climate and domestic policy instability can lead to sharp fluctuations in financial securities. In addition, natural disasters can undermine an emerging country’s ability to absorb issues related to traditional economic revenue generation such as raw materials.
Another issue that emerging markets face is wild currency swings. While many emerging countries attempt to tie their currency to the US dollar, those that are not pegged to the dollar can experience significant currency depreciation. Additionally, these countries are vulnerable to commodity swings, such as those of oil or food.