What Is an Emerging Market?


Quick Answer

Emerging markets are fast-growing economies that have instituted economic developments and reform programs and have begun to "emerge" into the global scene, according to Investopedia. The term fits markets of various sizes and the development aspects of an economy characterize the term than other factors.

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Full Answer

A crucial characteristic of an emerging market economy is its transitional nature as it moves from a closed system to an open system and sets up a structure of accountability, attests Investopedia. Emerging markets also have reformed their currency exchange rate systems because such reforms build confidence not just domestically but with foreign investors. The trust of foreign investors is necessary in the process of fully opening up an economy. Such reforms also create transparency and efficiency in a market,

Antoine W. Van Agtmael of the International Finance Corporation of the World Bank coined the term in 1981, and although such markets encompass only 20 percent of the world's economies, they include about 80 percent of the world's population, in large part because it includes China's economy, reports Investopedia. One of the most powerful economies in the world, experts consider China to be an emerging market as of 2015 because it is still involved in fully opening up its economy and becoming truly part of the larger global economy.

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