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Fed tightening and EM vulnerabilities: a stock-take

A handful of EMs – mainly in Asia – have taken steps to reduce their external vulnerabilities in the wake of last year’s “Taper Tantrum”. But these countries are the exception rather than the rule. Those EMs where external vulnerabilities are greatest – notably Turkey – have made little progress in reducing them over the past year and could find themselves back in the firing line as we move towards a first Fed rate hike.

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