what is an emerging market economy 
an emerging market economy is the economy of a developing nation that s becoming more engaged with global markets as it grows countries classified as emerging market economies are those with some but not all of the characteristics of a developed market characteristics of developed markets can include strong economic growth high per capita income liquid equity and debt markets accessibility by foreign investors and a dependable regulatory system it typically becomes more integrated with the global economy as an emerging market economy develops it can have increased liquidity in local debt and equity markets increased trade volume and foreign direct investment it can develop modern financial and regulatory institutions some notable emerging market economies include india mexico russia iran saudi arabia china and brazil an emerging market economy is transitioning from a low income less developed often pre industrial economy toward a modern industrial economy with a higher standard of living understanding an emerging market economyinvestors seek emerging markets for the prospect of high returns because these markets often experience faster economic growth as measured by gross domestic product gdp higher returns usually come with much greater risk however risks can include political instability domestic infrastructure problems currency volatility and illiquid equity because many large companies may still be state run or private local stock exchanges might not offer liquid markets to outside investors emerging markets generally don t have highly developed market and regulatory institutions like those found in developed nations market efficiency and strict standards in accounting and securities regulation are generally not on par with advanced economies such as those of the united states europe and japan emerging markets typically have a physical financial infrastructure including banks a stock exchange and a unified currency a key aspect of emerging market economies is that they adopt reforms and institutions like those of modern developed countries over time this promotes economic growth emerging market economies tend to move away from activities that are focused on agricultural and resource extraction toward industrial and manufacturing activities instead their governments usually pursue deliberate industrial and trade strategies to encourage economic growth and industrialization these strategies include export led growth and import substituting industrialization export led growth is more typical of economies that are considered emerging because it promotes more engagement and trade with the global economy emerging market countries also often pursue domestic programs such as investing in educational systems building physical infrastructure and enacting legal reforms to secure investors property rights frontier markets are usually smaller than emerging markets with lower per capita income less market liquidity and less industrialization they offer attractive investment opportunities but frontier markets are considered riskier for investors than emerging markets 