International Capital Flow Pressures

February 16, 2018

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Format: Chicago

Linda S. Goldberg, and Signe Krogstrup. International Capital Flow Pressures, (USA: International Monetary Fund, 2018) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

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 the 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.

Subject: Balance of payments, Capital flows, Central banks, Currencies, Currency markets, Exchange rate adjustments, Exchange rates, Financial markets, Foreign exchange, International reserves, Money

Keywords: Appreciation pressure, Base currency, Capital flow data, Capital flow pressure, Capital flows, Capital outflow pressure, Currencies, Currency experiences appreciation pressure, Currency markets, Exchange Market Pressure, Exchange rate, Exchange rate data, Exchange rate elasticity, Exchange rates, Flow data, Flow pressure, Foreign Exchange Reserves, Global, Home exchange rate depreciation, International reserves, Net capital, Outflow pressure, Reserves change, Risk aversion, Safe haven, WP

Publication Details

Pages:

58
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/030
Stock No:

WPIEA2018030
ISBN:

9781484341803
ISSN:

1018-5941

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