An exchange market pressure measure for cross country analysis. (May 2017)

• Record Type: Journal Article
• Authors: Patnaik, Ila; Felman, Joshua; Shah, Ajay
• Is Part Of: Journal of international money and finance. Volume 73:Part A(2017)
• Page Start: 62
• Page End: 77
• Publication Date: 2017-05
• Subjects: Exchange rate regime -- Capital flows -- Currency wars -- Monetary policy -- Exchange market pressure -- Statistical system; E52 -- F31 -- F32; International finance -- Periodicals; Foreign exchange -- Periodicals; Finances internationales -- Périodiques; Change -- Périodiques; Foreign exchange; International finance; Periodicals; 332.04205
• DOI: 10.1016/j.jimonfin.2017.02.004
• Languages: English
• ISSNs: 0261-5606

Abstract

Highlights: Exchange Market Pressure (EMP) is a valuable tool for research and policy. Conventional measures do not permit cross-country comparison. This paper constructs an EMP measure which is comparable across countries. This has myriad applications in downstream research and policy analysis. It helps clarify the monthly changes in the exchange rate in each country. Abstract: EMP measures in the existing literature are oriented towards applications in crisis dating and prediction. We propose a modified EMP measure where cross-country comparisons are possible. This is the sum of the observed change in the exchange rate with an estimated counterfactual of the magnitude of the change in the exchange rate associated with the observed currency intervention. We construct a multi-country dataset for EMP in each month. This opens up many new research possibilities.