Emerging market economies with open financial systems are highly vulnerable to rapid shifts in global investor sentiment. A sudden reversal of international investment flows can trigger an acute macroeconomic crisis, a phenomenon known as a Sudden Stop.
The Sudden Stop Transmission Sequence
[Global Policy Interest Rates Spike] 
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                 v
[Foreign Capital Abruptly Flees Local Assets] ----> Triggers rapid capital flight to safe havens
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                 v
[Domestic Currency Depreciates Rapidly] ----------> Inflates foreign-denominated debt burdens
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                 v
[Systemic Corporate & Sovereign Debt Crises] ------> Realizes emerging market contagion shocks

To defend the economy during a sudden stop, central banks deploy their liquidity tranches to support the currency, implement temporary macroprudential capital controls, and draw from international swap networks to preserve system stability.
 
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