ADB; Patnaik, Ila; Pundit, Madhavi2021-10-052021-10-052019-05N/AN/A2313-65372313-6545https://www.adb.org/publications/financial-shocks-exchange-market-pressurehttps://hdl.handle.net/20.500.14540/5628This paper provides evidence for the importance of capital account openness in buffering depreciation pressures during the taper tantrum in May 2013. After a long period of low interest rates in the United States, tapering quantitative easing in May 2013 led to sizable inflow reversals and currency depreciation in emerging and developing economies. This paper provides evidence for the importance of capital account openness in buffering depreciation pressures during the taper tantrum episode and shows that exposure to external private financing and having a more flexible exchange rate regime led to higher depreciation pressures. Macroeconomic fundamentals, however, did not matter for exchange market pressure.32EconomicsFinance sector developmentFinancial institutions and servicesFinancial marketsFinancial policyPublic financial management