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Ms. Linda S. Goldberg and Signe Krogstrup
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.
Ms. Linda S. Goldberg and Signe Krogstrup

or changing the policy rate, thereby moderating or preventing the signal value of exchange rate movements. In this paper, we propose a metric that combines price and quantity information, within an updated exchange market pressure index ( EMP ) building on early contributions ( Girton and Roper [1977] , Eichengreen, Rose, and Wyplosz [1994] and Kaminsky and Reinhart [1999] ). The EMP we propose is an alternative gauge of net capital flow pressures, which takes into account outright capital flows through foreign exchange reserves as well as exchange rate and

International Monetary Fund. European Dept.

depreciate; 2010-11 is a period of strong inflows, which prompted the CBRT to adopt its unorthodox monetary framework; late 2011 is the period of strong outflows, mitigated by an increase in the interest rates; 2012-13 is a period of renewed inflows, lasting until summer of 2013, when both the global environment and the local developments have yet again put pressure on the currency to depreciate. Exchange Market Pressure Index (Against US$. 6 Rolling Months) Source: Haver and IMF staff calculations. EMP Components (6 rolling months, re-normalized by 1