The risk of social unrest in many countries should not be underestimated. - Hélène Rey

More vulnerable countries have a much harder time borrowing. Sometimes, financial actors do not want to lend at all and we are faced with episodes of "sudden stops" of capital flows into emerging markets with no way to roll over the debt.

When it comes to risky assets (and emerging markets debt is considered a risky asset) risk and specifically credit risk gets priced in the yields of bonds issued by this country. When times are good, investors seem to be optimistic and the price of risk is very low across all kinds of assets. But when liquidity starts to be withdrawn, the price of these risky bonds in emerging or low-income countries goes up.

When the banking system goes down the drain, the economy goes down with it (2008 is still very fresh in our minds).