International Capital Flow Pressures

60 Pages Posted: 5 Feb 2018

See all articles by Linda S. Goldberg

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Signe Krogstrup

National Bank of Denmark - Economics Department; Danmarks Nationalbank (The Central Bank of Denmark); IMF

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Date Written: February 2018


Pressures on currencies manifest in exchange rate adjustments and international capital flows, and can also be offset by policy responses. This paper presents a theory-based measure of capital flow pressures, a new Exchange Market Pressure index, which combines pressures observed in exchange rate adjustments, official foreign exchange intervention and monetary policy changes. We use the index to identify so called safe-haven and risk-on status currencies and investigate the drivers of this status, showing the importance of country net foreign asset positions, size, and capital account openness. We also re-assess the contribution of the global financial factor in international capital flow pressures. The global factor explains a larger share of pressures on currencies measured using the EMP compared with using capital flow quantities. However, this global factor share is strongly dominated by idiosyncratic variation and only episodically large.

Suggested Citation

Goldberg, Linda S. and Krogstrup, Signe, International Capital Flow Pressures (February 2018). NBER Working Paper No. w24286, Available at SSRN:

Linda S. Goldberg (Contact Author)

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Signe Krogstrup

National Bank of Denmark - Economics Department ( email )

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