Sudden capital flight in EM

There have been significant research on "sudden stops" in emerging markets where there is a strong capital flight in a short period. The great fear for emerging markets since the 1998 Asian crisis has been the sudden stop. That is why EM countries have increased their foreign reserves and bought large amounts of US Treasuries. It serves as a buffer against these sudden stops of private bank lending. The alternative to the stops and associated devaluations is what we see now, sudden shifts in policy. The shift in policies usually mean major hikes in rates like what was seen in Turkey as well as India earlier this week.

We have gone from a QE world to a tighter interest rate world in a new sudden stop of cheap money.