Abstract

This paper examines the role of the US dollar in driving capital flows to EMEs. We develop a dataset on capital flows at the monthly frequency for a sample of 23 EMEs. Using a logit model, we find that the US Broad Dollar index is a determinant of the probability of experiencing an episode. We then employ local projection techniques to analyse the dynamic effects of the US dollar on capital flows to EMEs. Finally, we examine how limits on FX exposure help mitigating the impact of the dollar.

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