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.
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 exchangemarketpressureindex ( EMP ) building on early contributions ( Girton and Roper  , Eichengreen, Rose, and Wyplosz  and Kaminsky and Reinhart  ). 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
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.
(Against US$. 6 Rolling Months)
Source: Haver and IMF staff calculations.
(6 rolling months, re-normalized by 1