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

JEL Classification: F30; E50; E40;

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

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File(s): File format is application/pdf http://dx.doi.org/10.17016/IFDP.2015.1144
Description: http://dx.doi.org/10.17016/IFDP.2015.1144

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Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 2015-09-09

Number: 1144

Pages: 39 pages