International Capital Flow Pressures

59 Pages Posted: 14 Mar 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: February 2018


This paper presents a new measure of capital flow pressures in the form of a recast ExchangeMarket Pressure index. The measure captures pressures that materialize in actual internationalcapital flows as well as pressures that result in exchange rate adjustments. The formulation istheory-based, relying on balance of payments equilibrium conditions and international assetportfolio considerations. Based on the modified exchange market pressure index, the paperalso proposes the Global Risk Response Index, which reflects the country-specific sensitivityof capital flow pressures to measures of global risk aversion. For a large sample of countriesover time, we demonstrate time variation in the effects of global risk on exchange marketpressures, the evolving importance of the global factor across types of countries, and thechanging risk-on or risk-off status of currencies.

Keywords: Exchange Market Pressure; Risk aversion; Safe haven; Capital flows; Exchange Rate; Foreign Exchange Reserves, Exchange Market Pressure, Risk aversion, Safe haven, Capital flows, Exchange Rate, Foreign Exchange Reserves, Portfolio Choice, General

JEL Classification: F23, G11, G20, F32

Suggested Citation

Goldberg, Linda S. and Krogstrup, Signe, International Capital Flow Pressures (February 2018). IMF Working Paper No. 18/30, 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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