At the Emerging Markets Forum in October 2010, initial results were presented from an exercise that attempted to measure the resilience of emerging market and developing countries (EMDCs) to deal with shocks to their economies. This paper updates, improves upon, and draws conclusions from that index. A key conclusion is that the Resilience Index appears to have the power both to identify economies that are heading to trouble and to identify the specific policy areas of weakness that lie behind their increasing vulnerablility. The Resilience Index can add to the tools of the economic surveillance process-at least as a device to help insure that weaknesses are surfaced, and that deeper analysis is conducted to assess those weaknesses and suggest corrective policies. It is clear from this analysis that building resilience-and making it a priority of policymakers-can pay high dividends. In particular, we show that the Resilience Index clearly demonstrates that emerging weaknesses in many economies were evident well before the global crisis and the crisis in Europe.

The following conventions are used in this publication:• In tables, a blank cell indicates "not applicable," ellipsis points ( . . .) indicate "not available," and 0 or 0.0 indicates "zero" or "negligible." Minor discrepancies between sums of constituent figures and totals are due to rounding.• An en dash (-) between years or months (for example, 2005-06 or January-June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006).• "Billion" means a thousand million; "trillion" means a thousand billion.• "Basis points" refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).As used in this publication, the term "country" does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis. 2.1. Smaller Economies: Number of Banks 2.2. Emerging Market Countries and Smaller Economies with Floating Arrangements: Controlled Transactions A1.1. Emerging Market Countries and Smaller Economies: Selected Foreign Exchange Market Aspects A1.2. Median Daily Exchange Rate Percent Change, Emerging Markets and Smaller Economies with Floating Exchange Rate Arrangements A1.3. Maximum Daily Exchange Rate Percent Change, Emerging Markets and Smaller Economies with Floating Exchange Rate Arrangements A2.1. Market Turnover of Government Securities by Foreign Institutions A2.2. Market Turnover of Government Securities, Emerging Market Countries and Smaller Economies A3.1. Market Capitalization, 2005 A3.2. Smaller Economies and Emerging Market Countries: Number of Listed Companies A3.3. Smaller Economies and Emerging Market Countries: Market Capitalization A3.4. Smaller Economies and Emerging Market Countries: Turnover Boxes 3.1. The Danish Foreign Exchange Market 5.1. Stock Exchange Trading Systems in Smaller Economies A3.1. Implications of the Literature for Secondary Equity Markets in Smaller Economies ©International Monetary Fund. Not for Redistribution This page intentionally left blank ©International Monetary Fund. Not for Redistribution vii PrefaceThe dictum that country policy advice must always be tailored to the circumstances at hand is nowhere more true than in the area of financial market development. The size and sophistication of financial markets vary enormously across International Monetary Fund (IMF) member countries. Correspondingly, the financial sector policy challenges faced by different countries are quite different, ranging from dealing with the systemic stability implications of complex financial products in a large advanced country, to assessing whether a money market is worth developing in a small developing country. Fiscal, monetary, and many structural policy...