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

IMF

Multiple version iconThere are 3 versions of this paper

Date Written: February 2018

Abstract

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: https://ssrn.com/abstract=3140331

Linda S. Goldberg (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Signe Krogstrup

IMF ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
40
Abstract Views
165
PlumX Metrics