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Mr. Francis Y Kumah
This paper characterizes exchange market pressure as a nonlinear Markov-switching phenomenon, and examines its dynamics in response to money growth and inflation over three regimes. The empirical results identify episodes of exchange market pressure in the Kyrgyz Republic and confirm the statistical superiority of the nonlinear regime-switching model over a linear VAR version in understanding exchange market pressure. The nonlinear empirical approach adequately characterizes the data generation process and yields results that are consistent with theoretical predictions, particularly the dampening effect of monetary contraction on depreciation pressure. During periods of appreciation pressure, however, the reverse policy option-monetary expansion-may not be efficient, particularly where PPP rather than UIP drives exchange rates. In addition, monetary expansion in such cases defeats the primary objective of monetary policy-price stability-and may exacerbate the instability.
Mr. Francis Y Kumah

Intervention for Canada ,” Journal of International Economics , 39 , pp. 249 – 272 . Weymark , D. N. , 1997a , “ Measuring the Degree of Exchange Market Intervention in a Small Open Economy ,” Journal of International Money and Finance , 16 , pp. 55 – 79 . Weymark , D. N. , 1997b , “ Measuring Exchange Market Pressure and Intervention in Interdependent Economies: A Two-Country Model ,” Review of International Economics Vol. 5 ( 1 ), pp. 72 – 82 . Weymark , D. N. , 1998 , “ A General Approach to Measuring Exchange Market Pressure ,” Oxford

International Monetary Fund. Research Dept.
IMF research summaries on Latin America’s external linkages (by Shaun Roache) and on reaping the benefits of structural reforms (by Stephen Tokarick); regional study on the Eastern Caribbean Currency Union (by Paul Cashin and Evridiki Tsounta); listing of visiting scholars at the IMF during March–April 2008; listing of contents of Vol. 55 No. 2 of IMF Staff Papers; listing of recent IMF Working Papers; listing of recent external publications by IMF staff; and a call for papers for the Jacques Polak Ninth Annual Research Conference.
International Monetary Fund. Research Dept.

-at-Risk? Cakir, Selim; Raei, Faezeh No. 07/238 How Does Financial Globalization Affect Risk Sharing? Patterns and Channels Kose, M. Ayhan; Prasad, Eswar; Terrones, Marco No. 07/239 Operational Risk—The Sting Is Still in the Tail but the Poison Depends on the Dose Jobst, Andreas No. 07/241 Alternative Fiscal Rules for Norway Jafarov, Etibar; Leigh, Daniel No. 07/242 A Markov-Switching Approach to Measuring Exchange Market Pressure Kumah, Francis Y. No. 07/243 Implications of Oil Inflows for Savings and Reserve

Walter R. Gardner

—e.g., liabilities of the commercial banks. Moreover, liabilities to individuals, commercial banks, and other business corporations abroad are not payable in gold. Dollars are redeemed in gold only for foreign central banks and governments. But an outflow of open-market capital (or adverse developments elsewhere in the balance of payments) may shift dollars to central banks abroad, which may then convert them into gold. 11 While the deficit shown in the 1960 balance of payments should measure exchange-market pressures in 1960, which is what the deficit shown in line F of my

Mr. Evan C Tanner

,” Journal of International Economics , Vol. 39 , pp. 273 – 95 . Weymark , Diana N. , 1998 , “A General Approach to Measuring Exchange Market Pressure,” Oxford Economic Papers , Vol. 50 , pp. 106 – 21 . Wohar , Mark E. and Bun Song Lee , 1992 , “Application of the Girton-Roper Monetary Model of Exchange Market Pressure: The Japanese Experience, 1959–1986,” Indian Journal of Economics , Vol. 72 , pp. 379 – 107 . * Evan Tanner was an Economist in the IMF Western Hemisphere Department when this paper was written. The author

International Monetary Fund

inflation elasticities of real money balances. Substituting equations (1a) and (2a) in (4) , the following equation, which measures exchange market pressure is obtained: e ^ + r ^ = P ^ * + α 1 Y ^ + α 2 r ^ f + α 3 π ^ − d ^ − m ^ ( 5 ) where r ^ is the change in international reserves as a proportion of

Mr. Evan C Tanner
Exchange market pressure (EMP), the sum of exchange rate depreciation and reserve outflows (scaled by base money), summarizes the flow excess supply of money in a managed exchange rate regime. Examining Brazil, Chile, Mexico, Indonesia, Korea, and Thailand, this paper finds that monetary policy affects EMP as generally expected: contractionary monetary policy helps reduce EMP. The monetary policy stance is best measured by domestic credit growth (since interest rates contain both policy- and market-determined elements). In response to higher EMP, monetary authorities boosted domestic credit growth both in Mexico (confirming previous research) and in the Asian countries.
Mr. Evan C Tanner

. Tanner , Evan ( 1998 ) “ Deviations from Uncovered Interest Parity: A World-Wide Guide to Where the Action Is ” Washington DC : International Monetary Fund , Working Paper WP/98/115 Weymark , Diana N. ( 1995 ), “ Estimating exchange market pressure and the degree of exchange market intervention for Canada ,” Journal of International Economics , 39 : 273 - 95 Weymark , Diana N. ( 1998 ), “ A general approach to measuring exchange market pressure ,” Oxford Economic Papers ; 50 : 106 - 21 Wohar , Mark E. and Bun Song Lee ( 1992

Mr. M. Sbracia and Mr. Alessandro Prati
This paper studies how uncertainty about fundamentals contributed to currency crises from both a theoretical and an empirical perspective. We find evidenceCbased on a monthly dataset of Consensus forecasts for six Asian countries in the period January 1995-May 2001Cconfirming the theoretical predictions (from both unique- and multiple-equilibria models) that: (i) speculative attacks depend not only on actual and expected fundamentals but also on the variance of speculators' expectations about them; and (ii) the sign of the effect of the variance depends on whether expected fundamentals are "good" or "bad." These results are robust to the definition of exchange rate pressure indices, the estimation sample (precrisis vs. full sample), the method chosen to avoid spurious correlations, and possible time-varying coefficients for the mean, the variance, and the threshold separating good from bad expected fundamentals.