Financial Shocks and Exchange Market Pressure

Ila Patnaik and Madhavi Pundit

No 581, ADB Economics Working Paper Series from Asian Development Bank

Abstract: The taper tantrum episode induced a sudden outflow of capital from emerging markets back to the United States. This paper analyzes exchange market pressure in 93 developing and emerging market economies during this episode, drawing on recent methodological improvements in measuring exchange market pressure. We find that all economies in the sample that were integrated with global capital markets were heavily hit. Although popular discourse suggested that the extent of an economy’s fragility depended on its macroeconomic fundamentals, we find these fundamentals did not have much of a role in determining the level of pressure on a currency.

Keywords: capital flows; exchange market pressure; financial shock; international trade and finance; macroeconomics; taper tantrum (search for similar items in EconPapers)
JEL-codes: E52 F31 F32 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2019-05-15
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0581

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