Measuring Exchange Market Pressure and Intervention in Interdependent Economies: A Two-Country Model

Diana Weymark ()

Review of International Economics, 1997, vol. 5, issue 1, 72-82

Abstract: 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. Copyright 1997 by Blackwell Publishing Ltd.

Date: 1997
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