More documents from Bertoli, Simone; Gallo, Giampiero M.; Ricchiuti, Giorgio
More documents from Applied Economics

Export to your Reference Manger

Please Copy & Paste



Bookmark and Share

Exchange market pressure: some caveats in empirical applications

[journal article]

Bertoli, Simone; Gallo, Giampiero M.; Ricchiuti, Giorgio

fulltextDownloadDownload full text

(644 KByte)

Citation Suggestion

Please use the following Persistent Identifier (PID) to cite this document:

Further Details
Abstract The Exchange Market Pressure (EMP) index, developed by Eichengreen et al. (1994), is widely used as a tool to signal whether pressure on a currency is softened or warded off through monetary authorities' interventions or, rather, a currency crisis has originated. In this paper we show how the index is sensitive to some assumptions behind the aggregation of the information available (exchange rates, interest rates and reserves), especially when emerging countries are involved. Specifically, we address the way exchange rate variations are computed and the impact of different definitions of the reserves, and we question the constancy of the weights adopted. These issues compound with the choice of a fixed threshold when crisis episodes are identified through the EMP index. As a result, one should exert caution in subsequent econometric analyses where a dependent binary variable is built to identify crisis periods.
Classification Political Economy
Free Keywords Currency Crises; Exchange Market Pressure; Emerging Countries; Sensitivity Analysis; Speculative Attacks
Document language English
Publication Year 2008
Page/Pages p. 2435-2448
Journal Applied Economics, 42 (2008) 19
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)