International Dollar Flows

42 Pages Posted: 24 Sep 2015

See all articles by Ayelen Banegas

Ayelen Banegas

Board of Governors of the Federal Reserve System

Ruth Judson

Board of Governors of the Federal Reserve - Division of International Finance

Charles Sims

Federal Reserve Banks - Federal Reserve Bank of New York

Viktors Stebunovs

Board of Governors of the Federal Reserve System

Date Written: September 22, 2015

Abstract

Using confidential Federal Reserve data, we study the factors driving U.S. banknote flows between the United States and other countries. These flows are a significant component of capital flows in emerging market economies, where physical U.S. currency functions as a safe asset and precautionary demand for U.S. banknotes is a form of flight to quality. Prior to the global financial crisis, country-specific factors, including local economic uncertainty, largely explain the volume and heterogeneity of the flows. Since the crisis, global factors, particularly, global economic uncertainty, explain the flows markedly well. Further, precautionary demand for U.S. banknotes is not episodic.

Keywords: capital flows, currency flows, U.S. banknotes, safe asset, emerging market economies, economic uncertainty, flight to quality, capital flight, money demand

JEL Classification: F30, E40, E50

Suggested Citation

Banegas, Ayelen and Judson, Ruth A. and Sims, Charles and Stebunovs, Viktors, International Dollar Flows (September 22, 2015). FRB International Finance Discussion Paper No. 1144. Available at SSRN: https://ssrn.com/abstract=2664167 or http://dx.doi.org/10.2139/ssrn.2664167

Ayelen Banegas (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States

Ruth A. Judson

Board of Governors of the Federal Reserve - Division of International Finance ( email )

20th and C Streets, NW
Washington, DC 20551
United States

Charles Sims

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Viktors Stebunovs

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States

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