Measuring the Impact of Intervention on Exchange Market Pressure
We introduce an index of ex ante exchange market pressure (EMP) that can be used as a benchmark against which to measure the effectiveness of sterilized intervention. Ex ante EMP is the change in the exchange rate that would be observed if the authorities refrain from intervening and agents correctly anticipate this outcome. Ex post EMP measures exchange market pressure under the policy actually implemented. We use a ratio of these two EMP measures to assess the effectiveness of sterilized intervention in Canada and Australia, and find that its effects persist even in quarterly data.
|Date of creation:||2006|
|Date of revision:||2006|
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- Hodrick, Robert J. & Srivastava, Sanjay, 1984.
"An investigation of risk and return in forward foreign exchange,"
Journal of International Money and Finance,
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- Pierre L. Siklos, 2003. "Assessing the Impact of Changes in Transparency and Accountability at the Bank of Canada," Canadian Public Policy, University of Toronto Press, vol. 29(3), pages 279-299, September.
- Weymark, Diana N, 1998. "A General Approach to Measuring Exchange Market Pressure," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 106-121, January.
- Bonser-Neal, Catherine & Tanner, Glenn, 1996. "Central bank intervention and the volatility of foreign exchange rates: evidence from the options market," Journal of International Money and Finance, Elsevier, vol. 15(6), pages 853-878, December.
- Lewis, Karen K, 1995. "Are Foreign Exchange Intervention and Monetary Policy Related, and Does It Really Matter?," The Journal of Business, University of Chicago Press, vol. 68(2), pages 185-214, April. Full references (including those not matched with items on IDEAS)
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