IDEAS home Printed from https://ideas.repec.org/p/erg/wpaper/2025.html

A Var Analysis of Exchange Market Pressure: A Case Study for the MENA Region

Author

Listed:
  • Ahmed Kamaly

    (Economics Department, American University in Cairo)

  • Nese Erbil

Abstract

Recent currency crises in Asia and Latin America have once again raised the question of how policymakers can successfully defend exchange rates. In a managed exchange rate regime, exchange rate pressure can be translated into nominal devaluation and/or loss in international reserves. To capture this pressure, the exchange market pressure (EMP)- the sum of exchange rate depreciation and reserve outflows (scaled by base money)- was calculated and tested by a vector autoregression(VAR) framework for those MENA region countries (Egypt, Tunisia, and Turkey) adopting managed floating exchange rate regimes. The VAR framework enables us first to test whether contractionary policy- either a rise in real interest rate differential or a decrease in net domestic credit- has the expected effect on the exchange market pressure; and, second, to reckon how monetary authority uses its available short-term monetary tools to ease an increase in EMP.

Suggested Citation

  • Ahmed Kamaly & Nese Erbil, 2000. "A Var Analysis of Exchange Market Pressure: A Case Study for the MENA Region," Working Papers 2025, Economic Research Forum, revised 09 Jul 2000.
    • Handle: RePEc:erg:wpaper:2025
    as

    Download full text from publisher

    File URL: http://erf.org.eg/wp-content/uploads/2017/05/Microsoft-Word-2025-kamaly-web.pdf
    Download Restriction: no
    File URL: http://bit.ly/2qykCka
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
    2. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-548, September.
    3. Mr. Evan C Tanner, 1999. "Exchange Market Pressure and Monetary Policy: Asia and Latin America in the 1990s," IMF Working Papers 1999/114, International Monetary Fund.
    4. Amartya Lahiri & Carlos A. Vegh, 2000. "Delaying the Inevitable: Optimal Interest Rate Policy and BOP Crises," NBER Working Papers 7734, National Bureau of Economic Research, Inc.
    5. Celasun, Oya & Denizer, Cevdet & Dong He, 1999. "Capital flows, macroeconomic management, and the financial system - Turkey, 1989-97," Policy Research Working Paper Series 2141, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. M. Idrees Khawaja, 2007. "Exchange Market Pressure and Monetary Policy: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 12(2), pages 83-114, Jul-Dec.
    2. M. Idrees Khawaja & Musleh-ud Din, 2007. "Instrument of Managing Exchange Market Pressure: Money Supply or Interest Rate," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(4), pages 381-394.
    3. Siklar Ilyas & Akca Aysegul, 2020. "Exchange Market Pressure and Monetary Policy: The Turkish Case," Ekonomika (Economics), Sciendo, vol. 99(1), pages 110-130, June.
    4. Ammar Hamad Khalaf, 2018. "Foreign Exchange Market Pressure Index And Monetary Policy In Iraq," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 63(219), pages 61-82, October –.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gochoco-Bautista, Maria Socorro & Bautista, Carlos C., 2005. "Monetary policy and exchange market pressure: The case of the Philippines," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 153-168, March.
    2. Linda S. Goldberg & Signe Krogstrup, 2018. "International Capital Flow Pressures," NBER Working Papers 24286, National Bureau of Economic Research, Inc.
    3. 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, vol. 60(1), pages 97-103, July.
    4. Mr. Evan C Tanner, 2002. "Exchange Market Pressure, Currency Crises, and Monetary Policy: Additional Evidence From Emerging Markets," IMF Working Papers 2002/014, International Monetary Fund.
    5. Akemann, Michael & Kanczuk, Fabio, 2005. "Sovereign default and the sustainability risk premium effect," Journal of Development Economics, Elsevier, vol. 76(1), pages 53-69, February.
    6. M. Idrees Khawaja, 2007. "Exchange Market Pressure and Monetary Policy: Evidence from Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 12(2), pages 83-114, Jul-Dec.
    7. Emanuel-Werner Kohlscheen, 2000. "Estimating Exchange Market Pressure and Intervention Activity," Working Papers Series 9, Central Bank of Brazil, Research Department.
    8. 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.
    9. Caporale, Guglielmo Maria & Cipollini, Andrea & Demetriades, Panicos O., 2005. "Monetary policy and the exchange rate during the Asian crisis: identification through heteroscedasticity," Journal of International Money and Finance, Elsevier, vol. 24(1), pages 39-53, February.
    10. David O. Cushman, 2000. "The failure of the monetary exchange rate model for the Canadian‐U.S. dollar," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 33(3), pages 591-603, August.
    11. Yu-Ming Hsiao & Sheng-Chieh Pan & Po-Chin Wu, 2010. "Can intervention indices detect central bank's actual intervention behaviour?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(15), pages 1525-1530.
    12. M. Idrees Khawaja & Musleh-ud Din, 2007. "Instrument of Managing Exchange Market Pressure: Money Supply or Interest Rate," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(4), pages 381-394.
    13. Ramon Moreno, 2001. "Pegging and stabilization policy in developing countries," Economic Review, Federal Reserve Bank of San Francisco, pages 17-29.
    14. Couharde, Cécile & Delatte, Anne-Laure & Grekou, Carl & Mignon, Valérie & Morvillier, Florian, 2020. "Measuring the Balassa-Samuelson effect: A guidance note on the RPROD database," International Economics, Elsevier, vol. 161(C), pages 237-247.
    15. Vitek, Francis, 2006. "Measuring the Stance of Monetary Policy in a Small Open Economy: A Dynamic Stochastic General Equilibrium Approach," MPRA Paper 802, University Library of Munich, Germany.
    16. repec:spo:wpmain:info:hdl:2441/2091 is not listed on IDEAS
    17. Shioji, Etsuro, 2006. "Invoicing currency and the optimal basket peg for East Asia: Analysis using a new open economy macroeconomic model," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 569-589, December.
    18. Hiroshi Fujiki & Edward J. Green & Akira Yamazaki, 1999. "Sharing the risk of settlement failure," Working Papers 594, Federal Reserve Bank of Minneapolis.
    19. Sellin, Peter, 1998. "Monetary Policy and the Stock Market: Theory and Empirical Evidence," Working Paper Series 72, Sveriges Riksbank (Central Bank of Sweden).
    20. Kollmann, Robert, 2003. "Monetary Policy Rules in an Interdependent World," CEPR Discussion Papers 4012, C.E.P.R. Discussion Papers.
    21. repec:spo:wpmain:info:hdl:2441/765 is not listed on IDEAS
    22. Dongwon Lee & Yu-chin Chen, 2014. "What Makes a Commodity Currency?," Working Papers 201420, University of California at Riverside, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:erg:wpaper:2025. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Namees Nabeel (email available below). General contact details of provider: https://edirc.repec.org/data/erfaceg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.