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Measuring Exchange Market Pressure and Intervention in Interdependent Economies: A Two‐Country Model
Author(s) -
Weymark Dia.
Publication year - 1997
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00040
Subject(s) - interdependence , economics , intervention (counseling) , foreign exchange , currency , foreign exchange market , monetary economics , international economics , psychiatry , political science , law , psychology
In this article, operational exchange market pressure and intervention indices are derived for a world composed of two interdependent economies. The model‐consistent formulae, which can be calculated from observed data, are obtained by applying general definitions of exchange market pressure and intervention activity to a two‐country rational‐expectations model. It is demonstrated that the functional forms used to measure exchange market pressure and intervention activity depend on whether intervention is direct or indirect and also on whether foreign exchange reserves are held as currency or in the form of bonds.