Download full text
(643.5Kb)
Citation Suggestion
Please use the following Persistent Identifier (PID) to cite this document:
https://nbn-resolving.org/urn:nbn:de:0168-ssoar-242428
Exports for your reference manager
Exchange market pressure: some caveats in empirical applications
[journal article]
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 ... view more
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.... view less
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
DOI
https://doi.org/10.1080/00036840701858059
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)