International Dollar Flows

RePEc Short ID: pst550
ORCID iD: 0000-0003-4633-4631

Banegas, Ayelen; Judson, Ruth A.; Sims, Charles; Stebunovs, Viktors

doi:10.17016/IFDP.2015.1144

Working Paper

International Dollar Flows

Abstract: Using confidential Federal Reserve data, we study the factors driving U.S. banknote flows between the United States and other countries. These flows are a significant component of capital flows in emerging market economies, where physical U.S. currency functions as a safe asset and precautionary demand for U.S. banknotes is a form of flight to quality. Prior to the global financial crisis, country-specific factors, including local economic uncertainty, largely explain the volume and heterogeneity of the flows. Since the crisis, global factors, particularly, global economic uncertainty, explain the flows markedly well. Further, precautionary demand for U.S. banknotes is not episodic.

Keywords: capital flows; currency flows; U.S. banknotes; safe assets; emerging market economies; economic uncertainty; flight to quality; capital flight; money demand;

JEL Classification: E40; E50; F30;

https://doi.org/10.17016/IFDP.2015.1144