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Exchange Market Pressure in Central Europe: An Application of the Girton-Roper Model

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  • Stavarek, Daniel
  • Dohnal, Marek

Abstract

This paper applies the Girton-Roper model of exchange market pressure (EMP) on four Central European economies (Czech Republic, Hungary, Poland, Slovakia) over the period 1995-2008. The results suggest that there is a strong negative relation between domestic credit and EMP in all countries. We also found evidence of positive effect of domestic income on EMP in most of the countries. The paper reveals that EMP in the Czech Republic and Hungary was mostly absorbed by changes of exchange rate while changes in reserves absorbed EMP in Slovakia. The levels of EMP estimated do not pose a significant threat for fulfilment of the exchange rate stability convergence criterion.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15744.

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Date of creation: 15 Jun 2009
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Handle: RePEc:pra:mprapa:15744

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Keywords: exchange market pressure; Girton-Roper model; euro-candidate countries;

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  1. Pentecost, Eric J. & Van Hooydonk, Charlotte & Van Poeck, Andre, 2001. "Measuring and estimating exchange market pressure in the EU," Journal of International Money and Finance, Elsevier, Elsevier, vol. 20(3), pages 401-418, June.
  2. M. Idrees Khawaja, 1970. "Exchange Market Pressure and Monetary Policy : Evidence from Pakistan," Macroeconomics Working Papers 22208, East Asian Bureau of Economic Research.
  3. Victor Pontines & Reza Siregar, 2006. "Identifying And Dating The Episodes Of Speculative Pressures Against The Singapore Dollar," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 51(02), pages 113-133.
  4. Stavarek Daniel, 2008. "Exchange Market Pressure in Central European Countries from the Eurozone Membership Perspective," South East European Journal of Economics and Business, De Gruyter Open, vol. 3(2), pages 7-18, November.
  5. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, American Economic Association, vol. 67(4), pages 537-48, September.
  6. Priya Mathur, 1999. "An Exchange Market Pressure Model for India," Indian Economic Review, Department of Economics, Delhi School of Economics, Department of Economics, Delhi School of Economics, vol. 34(2), pages 127-148, July.
  7. Connolly, Michael & Dantas da Silveira, Jose, 1979. "Exchange Market Pressure in Postwar Brazil: An Application of the Girton-Roper Monetary Model," American Economic Review, American Economic Association, American Economic Association, vol. 69(3), pages 448-54, June.
  8. Rajmund Mirdala, 2009. "Interest Rate Transmission Mechanism of Monetary Policy in the Selected EMU Candidate Countries," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(3), pages 359-377, September.
  9. Barry Eichengreen, Andrew K. Rose, and Charles Wyplosz., 1995. "Speculative Attacks on Pegged Exchange Rates: An Empirical Exploration with Special Reference to the European Monetary System," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C95-046, University of California at Berkeley.
  10. Bahmani-Oskooee, Mohsen & Shiva, Reza, 1998. "A method of detecting whether a central bank engages in the black market for foreign exchange: Evidence from Iran," Economics Letters, Elsevier, Elsevier, vol. 60(1), pages 97-103, July.
  11. repec:lje:journl:v:2:y:2007:i:2:p:83-114 is not listed on IDEAS
  12. Weymark, Diana N., 1995. "Estimating exchange market pressure and the degree of exchange market intervention for Canada," Journal of International Economics, Elsevier, Elsevier, vol. 39(3-4), pages 273-295, November.
  13. Mirdala, Rajmund, 2009. "Interest rate transmission mechanism of the monetary policy in the selected EMU candidate countries (SVAR approach)," MPRA Paper 14072, University Library of Munich, Germany.
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