International Capital Flow Pressures

56 Pages Posted: 8 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

Multiple version iconThere are 3 versions of this paper

Date Written: January 29, 2018


This paper presents a new measure of capital flow pressures in the form of a recast exchange market pressure index. The measure captures pressures that materialize in actual international capital flows as well as pressures that result in exchange rate adjustments. The formulation is theory-based, relying on balance of payments equilibrium conditions and international asset portfolio considerations. Based on the modified exchange market pressure index, the paper also proposes a global risk response index, which reflects the country-specific sensitivity of capital flow pressures to measures of global risk aversion. For a large sample of countries over time, we demonstrate time variation in the effects of global risk on exchange market pressures, the evolving importance of the global factor across types of countries, and the changing risk-on or risk-off status of currencies.

Keywords: exchange market pressure, risk aversion, safe haven, capital flows, exchange rate, foreign exchange reserves

JEL Classification: F32, G11, G20

Suggested Citation

Goldberg, Linda S. and Krogstrup, Signe, International Capital Flow Pressures (January 29, 2018). FRB of New York Staff Report No. 834, Available at SSRN: or

Linda S. Goldberg (Contact Author)

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Signe Krogstrup

National Bank of Denmark - Economics Department ( email )

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