Risk-on

In a risk-on environment, they then sell those currencies and use the proceeds to buy risk assets with greater price appreciation potential. In a risk-off environment, they're compelled to sell their risk assets and buy back those funding currencies that they previously sold.

The higher the value of c1 (i.e., the higher the value of α), the faster the transition from a risk-off to a risk-on mode.

Capital flows have, however, continued to exhibit their well-known volatility, given the risk-on and risk-off scenario driven by investors' perception of the macroeconomic and financial developments in the source countries rather than the recipient countries.