Exchange Market Pressure: Evidences from ASEAN Inflation Targeting Countries
Monetary model of Exchange Market Pressure (EMP) is one of the best-known measures to determine size of intervention, which is needed to attain any favored exchange rate target. This study intends to examine the relationship between EMP and its determinant in ASEAN inflation targeting countries during 2006Q1-2016Q4. Monetary model of Exchange Market Pressure is employed. The results show that all variables are corresponding with the theory implies, except change in real income for Indonesia and Thailand, and change in world prices for Philippines. Thus, additional pressure by financial crisis is only found in Indonesian rupiah and Thai baht exchange rates. This study also proves that independent variables, which are used, can attempt favorable prediction of the value of EMP, especially during financial crisis. In the context controlling EMP, this study finds that these countries prefer to hold their currency exchange rate level by managing domestic credit and interest rate.
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