Exchange Market Pressure in India

Anuradha Guru () and Mandira Sarma ()
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Anuradha Guru: Centre for International Trade and Development,Jawaharlal Nehru University
Mandira Sarma: Centre for International Trade and Development,Jawaharlal Nehru University

Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi Discussion Papers from Centre for International Trade and Development, Jawaharlal Nehru University, New Delhi, India

Abstract: This paper constructs monthly Exchange Market Pressure index for India over the period 1992-2011. It then identifies stress events in the Indian currency markets, as represented by the extreme movements of this index using the extreme value theory approach. We show that this approach is superior to conventional methods of dating crisis periods as it focuses on the tail region of a statistical distribution. To judge the quality of this stress identification scheme, we compare the identified stress periods with actual events in the Indian currency markets and find strong correspondence between the two.

Pages: 32 pages
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