This paper measures the exchange market pressure (EMP) on the Australian dollar over the post-float period using the model-dependent approach proposed by Weymark (1995, 1998) and the model-independent approach developed by Eichengreen, Rose and Wyplosz (1996). Although there are some concerns over the estimation of the model-dependent index, the resulting EMP indices both appear to provide relatively plausible descriptions of the pressure on the Australian dollar. The role of foreign exchange intervention is examined through the construction of degree of intervention (DI) indices. The results reveal that intervention by the Reserve Bank of Australia contributed to the large depreciation of the Australian dollar between 1997 and 2001.
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Find related papers by JEL classification: C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions F31 - International Economics - - International Finance - - - Foreign Exchange G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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