NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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International Capital Flow Pressures

Linda S. Goldberg, Signe Krogstrup

NBER Working Paper No. 24286
Issued in February 2018, Revised in October 2019
NBER Program(s):International Finance and Macroeconomics Program, International Trade and Investment Program

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.

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Document Object Identifier (DOI): 10.3386/w24286

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