Index providers such as MSCI and FTSE Russell decide the classification, weighing market size, liquidity and how easily foreign capital can enter and leave. China, India, Taiwan, South Korea and Brazil dominate the standard emerging markets index.
Reclassification moves real money, because trillions track these benchmarks mechanically. A promotion to developed or a demotion to frontier forces index funds to buy or sell regardless of what they think of the country.
The dominant driver is usually external. Emerging market equities and bonds are highly sensitive to the dollar and to US interest rates, because much of their borrowing is dollar-denominated, so a strengthening dollar tightens their financial conditions without their own central banks doing anything.