Since the early 1990s, developing countries have become increasingly integrated in global markets.
Paradoxically, their overall growth has become less dependent on their external environment or more specifically, on imports of the high-income countries. Over the past 15 years, developing countries opened up their economies, increased exports, and quickly gained market share in global trade. Exports as a share of developing economies’ GDP increased from 22 percent in 1992 to 29 percent in 2000 and to 39 percent in 2007.
Over the same period their share in world exports increased gradually from 20 percent to 37 percent, with China responsible for fully one-half of the increase in market share. On first sight, the more dominant role of exports in developing countries suggests that their economies depend now—more than 15 years ago—on import demand in the high-income countries and on the global trade cycle.
However, this is not the case for two reasons. First, the remarkable export performance of developing countries has been driven by increased production capacity, not by acceleration of foreign demand.
Production capacity is currently constrained by a lack of adequate infrastructure (including power), not a lack of effective demand in world markets. Second, South-South trade is growing more than twice as fast as North-South trade, which reduces the impact of import demand in high-income countries. The shifts toward domestic drivers of growth in the developing world can be illustrated by decomposing GDP growth into trend and cyclical components.
Since the 1960s growth rates of developing countries and their high-income counterparts were remarkably similar. But during the 1990s structural growth rates diverged rapidly. In the meantime, the cyclical components of growth remained strongly correlated.
If anything, the correlation coefficient for cyclical growth between developing and high-income countries increased over time, consistent with the penetration of developing countries into global markets. However, overall growth in the developing world was increasingly dominated by quite strong trend growth, and cyclical fluctuations became a smaller percentage of growth.
And even with a cyclical downturn, growth rates exceeded previous peak rates. The acceleration in developing-country growth that set in after 2002 corresponds with the period of increasing commodity prices (lasting through today).
Could the current upturn in growth be simply a function of favorable terms of trade for developing commodity exporters (a boom, potentially “bust,” cycle) rather than a reflection of shifts in fundamentals? This is unlikely, in that the initial surge in oil, metals, and agricultural prices was initiated by the onset of faster output growth and strong materials demand in large emerging-market countries, such as the BRICs, or Brazil, Russia, India, and China. 
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