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Measuring Exchange Market Pressure and Intervention in Interdependent Economies: A Two-Country Model

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  • Weymark, Diana N

Abstract

In this article, operational exchange market pressure and intervention indices are derived for a world composed of two interdependent economies. The model-consistent formulae, which can be calculated from observed data, are obtained by applying general definitions of exchange market pressure and intervention activity to a two-country rational-expectations model. It is demonstrated that the functional forms used to measure exchange market pressure and intervention activity depend on whether intervention is direct or indirect and also on whether foreign exchange reserves are held as currency or in the form of bonds. Copyright 1997 by Blackwell Publishing Ltd.

Suggested Citation

  • Weymark, Diana N, 1997. "Measuring Exchange Market Pressure and Intervention in Interdependent Economies: A Two-Country Model," Review of International Economics, Wiley Blackwell, vol. 5(1), pages 72-82, February.
  • Handle: RePEc:bla:reviec:v:5:y:1997:i:1:p:72-82
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    1. Backus, David K & Kehoe, Patrick J & Kydland, Finn E, 1994. "Dynamics of the Trade Balance and the Terms of Trade: The J-Curve?," American Economic Review, American Economic Association, pages 84-103.
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    Cited by:

    1. Jan-Egbert Sturm & Timo Wollmershäuser, 2008. "The Stress of Having a Single Monetary Policy in Europe," CESifo Working Paper Series 2251, CESifo Group Munich.
    2. Mark P. Taylor & Lucio Sarno, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective and, If So, How Does It Work?," Journal of Economic Literature, American Economic Association, pages 839-868.
    3. Hegerty, Scott W., 2009. "Capital inflows, exchange market pressure, and credit growth in four transition economies with fixed exchange rates," Economic Systems, Elsevier, vol. 33(2), pages 155-167, June.
    4. Dur, Robert & Roelfsema, Hein, 2010. "Social exchange and common agency in organizations," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(1), pages 55-63, January.
    5. 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, pages 7-18.
    6. Officer, Lawrence H., 2002. "The U.S. Specie Standard, 1792-1932: Some Monetarist Arithmetic," Explorations in Economic History, Elsevier, vol. 39(2), pages 113-153, April.
    7. Stavarek, Daniel, 2007. "Comparative analysis of the exchange market pressure in Central European countries with the Eurozone membership perspective," MPRA Paper 3906, University Library of Munich, Germany.
    8. Stavarek, Daniel, 2006. "Estimation of the Exchange Market Pressure in the EU4 Countries: A Model-Dependent Approach," MPRA Paper 7256, University Library of Munich, Germany.
    9. Scott W Hegerty, 2010. "Exchange-market pressure and currency crises in Latin America: Empirical tests of their macroeconomic determinants," Economics Bulletin, AccessEcon, vol. 30(3), pages 2210-2219.
    10. Shabbir Ahmad & Abul Shamsuddin & Malcolm Treadgold, 2012. "A monetary analysis of foreign exchange market disequilibrium in Fiji," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, pages 66-81.
    11. Scott W. Hegerty, 2015. "Time-Varying Versus Fixed Weights in Exchange-Market Pressure Indices: Evidence From Tests Using Latin American Data," Bulletin of Applied Economics, Risk Market Journals, vol. 2(1), pages 21-36.
    12. Stavarek, Daniel, 2010. "Exchange Market Pressure and De Facto Exchange Rate Regime in the Euro-Candidates," Journal for Economic Forecasting, Institute for Economic Forecasting, pages 119-139.

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