Over time, EMEs have become increasingly integrated into global financial markets, which has heightened their sensitivity to external financial conditions such as changes in interest rates or risk sentiment in advanced economies. This integration has led to:

• Increased capital flow volatility: EMEs are more vulnerable to sudden capital outflows during global financial tightening.
• Greater exposure to global shocks: Events such as U.S. Federal Reserve interest rate hikes or financial crises in other regions can significantly impact EMEs.
• Enhanced reliance on foreign capital: The need for foreign investment in EMEs creates additional vulnerabilities when global risk appetite declines.

A is incorrect: EMEs are more susceptible to capital outflows due to their reliance on foreign capital and sensitivity to global risk sentiment.

B is incorrect: Rapid currency depreciation is more characteristic of EMEs, not typically AEs.

D is incorrect: While both can experience instability, the nature of the consequences differs, with EMEs more prone to currency crises and capital flight, whereas AEs are more prone to inflation and financial fragility.