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After more than a year of relatively small spillovers from the financial turmoil in advanced economies, equity prices in emerging markets (EM) succumbed to the dramatic worsening of financial distress in mid-September 2008. Still, in spring 2009, despite their steep and abrupt declines, emerging equity prices as a group were still above their level in 2003, which marked the beginning of their steep rally. The price declines, however, may not be over. This paper examines whether increasing financial integration has potentially raised EMs' vulnerability to external global shocks, focusing on the channel of equity markets.
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