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International Capital Flow Pressures and Global Factors

Linda Goldberg and Signe Krogstrup

No 1051, Staff Reports from Federal Reserve Bank of New York

Abstract: The risk sensitivity of international capital flow pressures is explored using a new Exchange Market Pressure index that combines pressures observed in exchange rate adjustments with model-based estimates of incipient pressures that are masked by foreign exchange interventions and policy rate adjustments. The sensitivity of capital flow pressures to risk sentiment, including for so-called safe-haven currencies, evolves over time, varies significantly across countries, and differs between normal times and extreme stress events. Across countries, risk sensitivities and safe-haven status are associated with self-fulfilling exchange rate expectations and carry trade funding currencies. In contrast, association with more traditional macroeconomic country characteristics is weak.

Keywords: exchange market pressure; risk aversion; safe haven; capital flows; exchange rates; foreign exchange interventions; global financial cycle (search for similar items in EconPapers)
JEL-codes: F32 G11 G20 (search for similar items in EconPapers)
Pages: 61
Date: 2023-02-01
New Economics Papers: this item is included in nep-fdg, nep-ifn, nep-int, nep-mon and nep-opm
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Citations: View citations in EconPapers (5)

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