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Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
International Dollar Flows
Ayelen Banegas
Ruth Judson
Charles Sims
Viktors Stebunovs
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.


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Download http://dx.doi.org/10.17016/IFDP.2015.1144
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Ayelen Banegas & Ruth Judson & Charles Sims & Viktors Stebunovs, International Dollar Flows, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1144, 09 Sep 2015.
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Keywords: capital flows; currency flows; U.S. banknotes; safe asset; emerging market economies; economic uncertainty; flight to quality; capital flight; money demand.
DOI: 10.17016/IFDP.2015.1144
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