Authors: Linda S. Goldberg and Signe Krogstrup
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Staff Reports
International Capital Flow Pressures
Number 834
February 2018 Revised September 2019
February 2018 Revised September 2019
JEL classification: F32, G11, G20
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 (EMP) 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 index compared with using capital flow quantities. However, this global factor share is strongly dominated by idiosyncratic variation and only episodically large.
Author Disclosure Statement(s)
Linda Goldberg
The author declares that she has no relevant or material financial interests that relate to the research described in this paper.
Signe Krogstrup
The author declares that she has no relevant or material financial interests that relate to the research described in this paper.
The author declares that she has no relevant or material financial interests that relate to the research described in this paper.
Signe Krogstrup
The author declares that she has no relevant or material financial interests that relate to the research described in this paper.
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