Linda Goldberg and Signe Krogstrup have a revised version of a paper entitled “International Capital Flow Pressures and Global Factors”. They write:

we revisit these issues by recognizing that the observed responses of quantities of capital flows, exchange rates, and domestic monetary policy to global factors are interdependent and in many countries cannot be studied in isolation. In countries with fully flexible exchange
rate regimes, exchange rates move quickly in response to incipient changes in capital flows, supplementing or even obviating the adjustment observable in capital flow volumes (Chari, Stedman and Lundblad, 2021). In contrast, in fixed exchange rate regimes,  managed floats, or even in some de jure flexible exchange rate  regimes, central banks use policy interventions such as domestic interest rate changes and official foreign exchange interventions to reduce the realized exchange rate response to global factors (Ghosh, Ostry and Qureshi, 2018).1 In such cases, capital flow pressures may show

Keep reading this article on Econbrowser Blog - James Hamilton & Menzie Chinn.

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