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Measuring the Impact of Intervention on Exchange Market Pressure

Pierre Siklos ()

Working Papers from Wilfrid Laurier University, Department of Economics

Abstract: We introduce an index of ex ante exchange market pressure (EMP) that can be used as a benchmark against which to measure the effectiveness of sterilized intervention. Ex ante EMP is the change in the exchange rate that would be observed if the authorities refrain from intervening and agents correctly anticipate this outcome. Ex post EMP measures exchange market pressure under the policy actually implemented. We use a ratio of these two EMP measures to assess the effectiveness of sterilized intervention in Canada and Australia, and find that its effects persist even in quarterly data.

Keywords: exchange market pressure; foreign exchange intervention; Bank of Canada (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2006, Revised 2006
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