lNTE&NATlONAL
ECOlOMlCS
ELStNER
Journal of International Economics 39 (1995) 273-295
Estimating exchange market pressure and the degree
of exchange market intervention for Canada
Diana N. Weymark
Department
of Economics,
Western Washington University,
Bellingham,
WA 98225, USA
Received August 1993, revised version received April 1995
Abstract
This article illustrates the method by which measures of exchange market pressure
and the degree of intervention can be obtained and applied as tools for policy
analysis. Using a fairly simple model of a small open economy with rational
expectations, quarterly measures of exchange market pressure and the degree of
intervention are calculated for the Canadian economy over the period 1975 to 1990.
A subset of these calculated values is then employed to analyze the Bank of
Canada’s conduct of exchange rate policy over the period 1981 to 1984.
Key words: Exchange market pressure; Exchange market intervention;
Canada policy
Bank of
JEL classification: F31
1. Introduction
Since the collapse of the Bretton Woods system, and the brief experiment
with freely floating exchange rates that followed it, policy authorities have
favored intermediate systems of exchange rate management. Because
intermediate exchange rate systems are characterized by changes in exchange rates and monetary base components, neither exchange rate nor
balance of payments statistics on their own fully characterize or capture the
consequences of the exchange rate policy employed.
In Weymark (1992), I used Frenkel and Aizemnan’s (1982) index of
managed float to develop a quantitative measure of the degree of exchange
0022-1996/95/$09.50 0 1995 Elsevier Science B.V. All rights reserved
SSDI 0022-1996(95)01389-X
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D.N. Weymark
I Journal of International
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market intervention. The intervention index I propose characterizes intervention policy in terms of the proportion of exchange market pressure
relieved by exchange market intervention. The measure of exchange market
pressure used to calculate the index is a generalized version of the measure
introduced by Girton and Roper (1977). In this article I demonstrate how
these measures of exchange market pressure and intervention activity can be
obtained and applied as tools for policy analysis. Using a fairly simple model
of a small open economy with rational expectations, quarterly measures of
exchange market pressure and the degree of intervention are calculated for
the Canadian economy over the period 1975 to 1990.’ A subset of these
calculated values is then used to analyze a number of Howitt’s (1986)
observations on the Bank of Canada’s conduct of exchange rate policy over
the period 1981 to 1984.
The paper is organized as follows. Section 2 provides the details of the
analytical model. Bilateral model-consistent measures of exchange market
pressure and the degree of intervention are discussed in Sections 3 and 4,
respectively. Multilateral measures of exchange market pressure and intervention activity are derived in Section 5. Quarterly measures of exchange
market pressure and the degree of intervention are calculated using
Canadian data in Section 6. A general discussion of the interpretation of the
calculated values is also found in this section. In Section 7, the estimated
values of exchange market pressure and the degree of intervention are used
to analyze the intervention practices of the Bank of Canada over the period
1981 to 1984. A brief summary and conclusion is found in Section 8.
2. The model
The model employed in this section is one of a small open economy in
which the domestic price level is influenced by both the level of foreign
prices and the exchange rate, but purchasing power parity does not
necessarily hold. Domestic output and the foreign price level are exogenous.
It is assumed that the small open economy has well-developed financial
markets and that domestic and foreign assets are perfect substitutes.
Domestic residents hold domestic currency for transactions purposes as well
as speculative balances of foreign claims. Foreign and domestic interest rates
are linked through an uncovered interest parity condition.
The model specification was chosen with the Canadian economy in mind.
The objective in choosing this particular model specification was to make
1Models of this type have been used extensively in the optimal intervention literature. See,
for example, Buiter and Eaton (1985), Eaton and Turnovsky (19&I), and Turnovsky (1983,
1985).
D.N. Weymark
I Journal of International
Economics 39 (1995) 273-295
275
the estimation of exchange market pressure and the degree of exchange
market intervention as simple as possible and, at the same time, capture the
most essential features of the Canadian economy.* The model is given by:
mf = pt + b, yl - b,i, + u,
(1)
pr = a, + alp:
(2)
+ a2er
i, = i: + E[e,+,lt] - e,
m~=m~_,+Ad,+Ar,
Ar, = - 6, be,
where:
mt = the logarithm of the money stock in period t with the superscripts s
and d denoting supply and demand, respectively
PI = the logarithm of domestic price level in period t
Y, = the logarithm of real domestic output in period t
= the logarithm of the domestic interest rate level in period t
it
vt = the stochastic money demand disturbance in period t
et = the logarithm of the period t exchange rate expressed as the domestic
currency cost of one unit of foreign currency
where h, is the money multiplier in period t,
Ad, = [h,D, - h,-lDr-l]/M,-l
D, is the stock of domestic credit, and M,-, is the inherited money
stock in period t
where R, is the stock of foreign exchange
Ar, = [h,R, - h,-,R,-JIM,-,
reserves in period t, with h, and M,-, defined as above
Pt = the policy authority’s time-variant response coefficient.
Asterisks are used to denote the foreign counterparts of the relevant
domestic variables and the notation E[e,+,lt] represents the value that
rational agents expect the variable e to take on in period t + 1, conditional
on the information available in period t. For concreteness, it is assumed that
private agents and the policy authority have accessto the same information
and that the exchange rate, e,, and the domestic interest rate, i,, are the only
variables that domestic agents can observe contemporaneously.
Eqs. (1) and (3) are standard to small open economy models in which
output is assumed to be exogenous and domestic and foreign assets are
freely-traded perfect substitutes. Eq. (2) characterizes domestic prices as
responsive to the level of foreign prices and to the exchange rate but does
‘As quarterly data is used in this study, the assumption that output is exogenous simply
reflects the proposition that output does not respond to changes in prices or demand conditions
within one quarter. The assumption that output is exogenous within quarters was confirmed
using a Wald test for simultaneity.
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D.N. Weymark I Journal of International Economics 39 (1995) 273-295
not impose purchasing power parity a priori. Eq. (2) allows for systematic
deviations from purchasing power parity and also for the possibility that
foreign price changes and exchange rate changes may have significantly
different effects on the domestic price level. Clearly, Eq. (2) reduces to
purchasing power parity when a, = 0 and a, = a2 = 1.
Eq. (4) describes the supply of money as depending on the inherited
money stock, rns-,, the change in domestic credit, Ad,, and the change in
foreign exchange reserves, Arr.3 According to Eq. (5), changes in foreign
exchange reserves occur as a result of the policy authority’s response to
contemporaneous changes in the exchange rate, Ae,. The policy authority’s
response function is Ar, = - &Ae,. When fi, = 0, the policy authority allows
the exchange rate to float freely and there is no change in the domestic
money supply. Under a system of perfectly fixed exchange rates, the policy
authority uses direct exchange market intervention to hold the exchange
rate constant and P, = w. Values of ii, that fall between 0 and 03 are
characteristic of intermediate intervention policies. Negative values of p, are
associated with intervention activities that generate changes in the exchange
rate that are either of the opposite sign or, if of the same sign, larger than
the changes that would have occurred under a pure floatP
Substituting Eqs. (2) and (3) into Eq. (1) reveals that the demand for
money in this economy is determined by:
rnf = II, + alp: + (a, + b,)e, + b,y, - b,i: - b2E[ef+l(t] + u, .
Under the assumption that the money market clears continuously, rn: =
mf= m, for all t. Using this assumption together with Eqs. (4), (5) and (6)
allows money market equilibrium to be expressed in deviation form as:
Ad, - ji, Ae, = a, Ap: + (a, + 6,) Ae, + b, Ay,
- b, Ai: - b, AE[e,+,]t] + u, .
(7)
Eq. (7) shows that the magnitude of the exchange rate change needed to
restore money market equilibrium subsequent to an exogenous disturbance
depends on the policy authority’s choice of ,Z,. In this model, the possible
3 Calculation of the ratio of the MlA money stock (which is later used in estimating exchange
market pressure and intervention indices) to the monetary base shows that there was significant
variation in the Canadian MlA money multiplier over the sample period. Girton and Roper’s
original definitions, the Ad, and Ar,, have therefore been amended to allow for a time-varying
money multiplier.
4 In the optimal monetary policy literature, it is assumed that p, takes on only non-negative
values. This is a result of focusing on stabilization policy. If, however, one allows for the
possibility that policy authorities might choose to employ monetary policy in a more aggressive
manner (for example, actively depreciate a currency at a time when private market forces
would generate an appreciation), then negative values should also be considered.
D.N. Weymark
I Journal of International
Economics 39 (1995) 273-295
277
sources of exogenous disturbances to the economy are: changes in the
foreign price level (Ap,*), changes in the level of domestic output (Ay,),
changes in the foreign interest rate level (hi:), changes in domestic credit
(Ad,) and the random money demand shock U, = Au,.
Eq. (7) indicates that the change in the value of the exchange rate in the
small open economy is given by:
he,=i{Xt - b,AE[e,+lbl>
where
p,= - [pr+ + b21
a2
x, = [aI Ap: + b, Ay, - b, Ai,* + u, - Ad,].
The term inside the parentheses is the excess demand for money (EDM,)
that is generated by the combination of exogenous disturbances that occur in
period t and also by the agents’ expectations about exchange rate changes.
Eq. (8) indicates that the policy authority’s choice of 3, and the structural
parameters a2 and b, jointly determine the magnitude of equilibrating
exchange rate changes that are observed. When P, = ~4,p, = - CQand Ae, = 0
indicating that the policy authority has chosen to hold the exchange rate
fixed using some combination of direct and indirect intervention. When, at
the other extreme, the policy authority refrains from all exchange market
intervention, P, = 0 and /3,= - [a2 + b2]. In this case any existing excess
demand for domestic money is eliminated by private market forces and
Ar, = - P, Ae, = 0. When - [a2 + b,] <P, < 0, Ae, is of the same sign but
greater than the exchange rate change that would have been observed in the
absence of intervention by the policy authority. For all values of P, <
- [a2 + b2], the observed exchange rate change, Ae,, and the change in the
exchange rate that would have been observed in the absence of intervention
are of the opposite sign.
3. Exchange market pressure’
Intermediate exchange rate systems generate simultaneous changes in the
exchange rate and foreign exchange reserves. However, there is to date no
generally accepted method of combining observed changes in these variables
into a summary statistic that is useful for policy analysis. I propose a
generalized version of Girton and Roper’s (1977) measure of exchange
‘This section summarizes Weymark (1993), to which the reader is referred for further
details.
278
D.N. Weymark
I Journal
of International
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market pressure as a solution to this problem. As all such measures are
model-specific, I also introduce a general definition of exchange market
pressure from which model-consistent exchange market pressure formulae
can be derived.
Girton and Roper used the term “exchange market pressure” to refer to
the magnitude of money market disequilibrium that must be removed either
through reserve or exchange rate changes. Their model specification and
their assumption that policy authorities do not employ domestic credit
changes to influence exchange rate levels ensures that exchange market
pressure is the simple sum of the percentage change in the exchange rate
and in foreign exchange reserves. In a later article, Roper and Turnovsky
(1980) used a different model specification and allowed intervention to take
the form of changes in domestic credit as well as changes in reserves. Roper
and Turnovsky found that the excess demand for money was equal to a
linear combination of changes in the exchange rate and in the monetary base
and that, in general, these two components are not equally weighted.
The measures of exchange market pressure used by Girton and Roper and
by Roper and Turnovsky are formulae that are derived from specific models
and do not constitute a general definition of exchange market pressure. In
order to provide a basis for deriving model-consistent measures of exchange
market pressure for any model, I propose the following model-independent
definition:
Definition. Exchange market pressure measures the total excess demand
for a currency in international markets as the exchange rate change that
would have been required to remove this excess demand in the absence of
exchange market intervention, given the expectations generated by the
exchange rate policy actually implemented.
From this definition it is evident that exchange market pressure can only
be observed directly and without further computation when the domestic
currency is allowed to float freely. Whenever this is not the case and 6, # 0,
the magnitude of exchange market pressure will have to be imputed from
observed changes in the exchange rate, changes in foreign exchange
reserves, and (when appropriate) changes in domestic credit. Under intermediate exchange rate systems, the calculation of exchange market pressure
therefore involves a measurement experiment in which observed foreign
exchange reserve and domestic credit changes are converted into exchangerate-equivalent units and then combined with observed exchange rate
changes to yield a composite summary statistic. When all intervention takes
the form of purchases or sales of foreign exchange reserves, the exchange
market pressure formulae generated by log-linear small open economy
models are of the form: EMP, = Ae, + qAr, where n represents the elasticity
D.N. Weymark
I Journal of International
Economics 39 (1995) 273-295
279
- aAe,/ dbr,! The Girton-Roper
and Roper-Turnovsky exchange market
pressure measures are both special cases of this more general formula.
The exchange market pressure formula that is consistent with the model
employed in this article can be obtained from Eq. (8). With Ar, = - P, Ae,,
Eq. (8) can be expressed as:
(9)
The elasticity 7) = - aAe,laAr, converts observed reserve changes into
equivalent exchange rate units. In order for this conversion to be accomplished without altering the underlying size of the excess demand associated
with the components of X, and the actual exchange rate policy implemented
by the policy authority in period t, the expectational change, AE[e,+l]t],
must be held constant when exchange market pressure is imputed. With X,
independent of Ar, and AE[e,+,]t] held constant, the model-consistent
elasticity n obtained on the basis of Eq. (10) is: - aAe,/aAi-, = - [a2 + b,]-‘.
The measure of exchange market pressure implied by the model presented
in Section 2 is therefore:
EMP, = be, + n Ar,
(10)
where n = - [a2 + b,]- l. Because n varies with the model specification,
calculated values of exchange market pressure will not, in general, be model
independent.
Eq. (10) was derived under the assumption that exchange market
intervention is unsterilized. As the Bank of Canada is known to engage in
sterilization, it is worthwhile to consider what impact, if any, sterilization
has on the exchange market pressure formula.’ The foregoing analysis is
quite easily modified to allow for the possibility of sterilization.
The methodology presented in this article uses the conditions that exist in
the domestic money market to obtain information about the conditions in
’ When, in addition to the purchase or sale of foreign exchange reserves, the policy authority
employs domestic credit changes to influence the exchange rate, the exchange market pressure
formula generated by log-linear models has the general form: EM’, = Ae, + n[Ar, + AAd,]
where A is the proportion of the observed domestic credit change that is associated with indirect
exchange market intervention. For Canada, Ad, and Ar, are most often of opposite sign over
the sample period, indicating that Canada does not systematically employ domestic credit
changes (indirect intervention) to influence the external value of its currency.
‘To test the strength of the negative relationship over the sample period, changes in
domestic credit were regressed on changes in foreign exchange reserves. The regression results
showed that the offset coefficient, AD,lAR,, was not significantly different from - 1. indicating
that exchange market intervention by the Bank of Canada is fully sterilized.
280
D.N. Weymark I Journal of International Economics 39 (1995) 273-295
the foreign exchange market. Because sterilization activity drives a wedge
between money market conditions and the associated foreign exchange
market conditions, it is necessary to consider the relationship between the
demand for money and the money stock prior to sterilization in order to use
money market conditions to obtain information about the exchange rate.
The effect of the domestic country’s money market conditions on the foreign
exchange market is therefore determined by:
Am: - Ads = Amp
(11)
where Ad; represents the size of the sterilizing domestic credit change and
Ad, is, as before, the autonomous domestic credit change.
When the impact of sterilization on the money supply is taken into
account, Eq. (4) becomes:
Am: = Ad, + Ads + Ar,
(12)
Substituting Eq. (12) into Eq. (11) results in the market-clearing condition
Ad, + Ar, = Am,d which, when combined with Eq. (6), yields Eq. (8). Eq.
(10) therefore applies to sterilized as well as unsterilized intervention.
As exchange market pressure estimates based on Eq. (10) are used in
Section 7 to measure the magnitude of speculative attacks against the
Canadian dollar, some discussion of the practical interpretation of these
estimates is in order. By definition, exchange market pressure measures the
excess demand for a currency associated with the exchange rate policy
actually implemented by the policy authority in a given time period in terms
of exchange-rate-equivalent units. In rational expectation models, the
exchange-rate-equivalent measure, EMP,, is not synonymous with the
exchange rate change that would have been observed under a pure float
because the expectations associated with a pure float will differ from those
held under the policy actually implemented whenever forward-looking
rational expectations solutions are employed.8 For this reason, the imputed
exchange market pressure calculations should not generally be interpreted
as the exchange rate change that would have occurred under a freelyfloating exchange rate system. What the imputed exchange market pressure
values do measure is the size of the exchange rate change that would have
occurred if the policy authority had unexpectedly refrained from intervening
in the exchange market. Exchange market pressure is therefore best viewed
*A simple example can be used to illustrate this point. Suppose that all of the forcing
variables in Eq. (8) follow a random walk with a drift. Then with he, observable contemporaneously, AE[e,+,It] = Be,. As Ae, is a function of I?,, so is AE[e,+, It] causing Ae,(float) to differ
from EMP, when p, # 0.
D.N. Weymark
/ Journal of International
Economics 39 (1995) 273-295
281
as a measure of the size of external imbalance and, as such, is a useful
measure of the magnitude of speculative attacks.
4. Intervention
activity
In Weymark (1992), I proposed an index of exchange market intervention
that measures the intervention activity of the policy authority in terms of the
proportion of exchange market pressure relieved by exchange market
intervention. When the policy authority engages only in direct exchange
market intervention, the intervention index, w,, is defined as:
rl Ar,
Of = m
Art
= (1 /v)Ae, + Ar, ’
(13)
When a policy authority is known to use direct as well as indirect
intervention, Eq. (13) must be modified in order to capture the impact of
the change in domestic credit on the exchange rateP
The intervention index, w,, is closely related to the index of managed float
proposed by Frenkel(l980) and Frenkel and Aizenman (1982). Frenkel and
Aizenman’s index, x, characterizes exchange rate policy in terms of the
ratio 3/t= Ae,/Ae,(float), where Ae,(float) is the exchange rate change that
would have been observed under a pure float.” At first glance it seems that
the difference between the two indices is one of form rather than substance.
There are however important practical advantages in using w, rather than ‘y,
as an index of intervention activity. From an operational standpoint, the
most important advantage that o, has over yI is that both the numerator and
the denominator of w, can be calculated using observed data, whereas the
denominator of ‘yr generally cannot be observed directly. In addition to the
operational problems associated with ‘ye,there is also a conceptual problemthe usefulness of ‘yt as a measure of intervention activity is restricted to
analyses of small open economies. A standard assumption in small open
economy analyses is that the economy under study is so small that the rest of
the world never bothers to intervene against that currency. With the rest of
the world effectively floating, any evidence of intervention captured by yt must
be attributable to the domestic policy authority. In larger interdependent
9 In particular, intervention activity must be measured as: w(A), = [Ar, + AAhd,]/{Ae, +
n[Ar, + AAd,]}, where A is the proportion of the observed domestic credit change that is
associated with indirect exchange market intervention. The derivation of w(A), is discussed in
Weymark (1992).
“The systematic relationship between Frenkel and Aizenman’s index of managed floating
and the response coefficient, p,, first noted by Cuddington (1991) also holds for the
intervention index, w,.
282
D.N. Weymark / Journal
of International
Economics 39 (1995) 273-295
economies, however, the observed exchange rate will generally be jointly
determined by the intervention activities of all partner countries and x
cannot capture the intervention activity of individual policy authorities. No
such difficulty is encountered with the intervention index, 0,. For these
reasons, o, is used to characterize the Bank of Canada’s exchange rate
policy in this article.”
The intervention index, w,, has a range from - ~0to + w. When the policy
authority allows the exchange rate to float freely, Ar, = 0 and o, = 0. When
the policy authority employs direct exchange market intervention to hold
the exchange rate fixed Ae, = 0 and w, = 1. Intermediate exchange rate
systems are characterized by values of o, that lie between 0 and 1. It is also
possible to interpret values of o, that lie outside the [O,l] interval. Negative
values of wt occur when the policy authority actively depreciates (appreciates) the domestic currency with respect to its free float value and the
exogenously generated excess demand for domestic currency is negative
(positive). That is, intervention by the policy authority magnifies the
exchange rate change generated by private market forces. This sort of policy
might be thought of as “leaning with the wind”. At the other extreme, when
w, > 1, the exchange rate is observed to move in the opposite direction to
that which would have occurred in the absence of intervention. In this case
the policy authority actively depreciates (appreciates) the domestic currency
with respect to its free float value, when the exogenously generated excess
demand for domestic currency is positive (negative). In terms of reserve
changes, w, > 1 implies that the intervention practices of the policy authority
result in Ar, > EDM, when EDM, > 0 and Ar, < EDM, when EDM, < 0. One
might interpret this as an extreme form of “leaning against the wind”.
5. Multilateral exchange market pressure and intervention measures
Up to this point there has been no discussion of the practical definition of
Ae,. Given that exchange market intervention has, through Eq. (5), been
characterized as occurring in response to observed exchange rate changes,
this issue is clearly of some theoretical as well as empirical importance. In
their calculations of exchange market pressure for Canada, Girton and
Roper define be, as the bilateral Canada-U.S. exchange rate and use U.S.
prices and interest rates as the relevant foreign variables. Calculating Eqs.
(10) and (13) using a bilateral exchange rate yields bilateral measures of
exchange market pressure and exchange market intervention. Multilateral
measures of exchange market pressure and exchange market intervention
*’ A more detailed exposition of the properties and interpretation of w, may be found in
Weymark (1992).
D.N. Weymark
I Journal
of International
Economics 39 (1995) 273-295
283
can be obtained by employing an effective (or weighted average) exchange
rate to represent be,.
Howitt (1986) has argued that when domestic prices and interest rates
respond to a weighted average of bilateral exchange rates, domestic
monetary policy should be formulated on the basis of an effective exchange
rate, ey. In the context of this analysis, what Howitt is proposing is a
time-varying, multiple partner version of Eq. (5):
Ar, = - pr Ae:
(14)
where
e{ is the domestic currency price of the jth country’s currency, wi represents
the weight assigned to the jth trading partner, and 7~ is the number of
trading partners .
Using Eq. (14) it is relatively straightforward to derive multiple-partner
measures of exchange market pressure and intervention for the small open
economy. The multiple partner analogs of Eqs. (10) and (13) are given by
Eqs. (15) and (16) respectively:
EMPY = Aey + qw Ar,
0: = 77% _
EMP:
(15)
Art
(l/qw)Ae: + Ar, .
(16)
where q”’ = - aher /aAr,. In the context of the model employed in this
article, nW is given by nW= - [a2 + b&l.
In the following section, the bilateral Can/U.S. exchange rate is used to
obtain bilateral measures of exchange market pressure and exchange market
intervention for Canada. Multilateral measures are calculated using the
Bank of Canada’s G-10 and the International Monetary Fund’s MERM
effective exchange rate indices.
6. Estimation of exchange market pressure and intervention indices
In this section, bilateral and multilateral exchange market pressure and
intervention indices are calculated for Canada from 1975 to 1990 using
quarterly data. The purpose of this section is to illustrate the method by
which model-consistent estimates of intervention activity can be obtained
and used to characterize exchange rate policy.
The calculation of model-consistent measures of exchange market pres-
284
D.N. Weymark I Journal of International Economics 39 (1995) 273-295
sure and intervention activity requires the estimation of the bilateral
elasticity 71and the multilateral elasticity 7”‘. The elasticity measures that are
consistent with the model employed in this article are both composed of the
parameters a2 and b,. The parameter a2 reflects the importance of the
exchange rate as a determinant of the domestic price level, and b, is the
interest elasticity of the demand for money. For the purposes of this article,
a2 and b, were obtained on the basis of single-equation estimation of Eqs.
(1) and (2), respectively.
Parameter estimates were obtained using 2SLS estimation. Because all
data were found to be I(l), estimation was undertaken using first-differenced data. In the final stages of the estimation procedure, the data were
transformed to correct for moving-average error processes. Further details
of the estimation procedures employed are provided in Appendix 1. The
final regression results yielded the following parameter estimates:
6, = 0.17211 li2” = - 0.00092
6* = 0.15163 62” = 0.12720
Based on these parameter estimates, the model-consistent elasticities, $
and G”‘, are:
+j = -3.0889
7jw= -7.91891.
Quarterly measures of exchange market pressure and the degree of
exchange market intervention over the period 1975 to 1990 are provided in
Table l(a) and (b). Bilateral and multilateral (GlO and MERM) measures of
exchange market pressure are calculated in accordance with Eqs. (10) and
(15), respectively. The measures of the degree of intervention reported are
ot from Eq. (13) and W: from Eq. (16).‘*
Exchange market pressure estimates associated with the bilateral, Can/
U.S., and multilateral, GlO and MERM, exchange rates are reported in the
first three columns of Table l(a) and (b). The bilateral and multilateral
exchange market pressure estimates show that there was sustained downward pressure on the value of the Canadian dollar from 1975(11) to
1984(1V). From 1985 onwards, however, 18 of the 24 quarterly estimates
have negative signs, indicating that there was pressure for the Canadian
dollar to appreciate over this period. The large positive estimates obtained
for 1989(B) and 1990(I) are evidence of speculative attacks against the
Canadian dollar in those quarters.
Bilateral and multilateral measures of the degree of intervention, are
reported in the last three columns of Table l(a) and (b). The frequency with
“The time-varying money multiplier needed to calculate Ar, was obtained quarterly as the
MlA money stock divided by the monetary base.
D.N. Weymark
I Journal of International
Table l(a)
Exchange market pressure and intervention:
Exchange market pressure
Can/US
G-10
1975(H)
1976
1977
1978
1979
1980
1981
1982
0.126886
0.014270
-0.073320
-0.023202
0.015814
0.023579
0.057315
0.059578
0.055842
0.044660
0.169525
0.101743
-0.185857
0.122291
-0.150653
0.063748
0.064080
-0.003776
0.129647
-0.057881
0.014768
-0.026833
0.085819
0.077720
0.090841
0.044591
-0.222914
0.085843
0.077280
-0.123478
-0.039697
0.243248
0.015118
-0.138207
0.020935
0.103701
0.064674
0.094592
0.017123
0.063159
0.052804
0.321533
0.215402
-0.524872
0.249028
-0.497456
0.142005
0.255905
-0.039947
0.312329
-0.116026
0.017904
-0.039817
0.144587
0.176243
0.232715
0.087771
-0.519168
0.176038
0.101235
-0.322703
-0.045637
285
Economics 39 (199.5) 273-29.5
1975(11)-1982(IV)
MERM
Degree of intervention
G-10
Can-U.S.
MERM
0.243477
0.018079
-0.136952
0.021523
0.105315
0.064754
0.094472
0.016762
0.063158
0.052853
0.320369
0.212814
-0.524410
0.246691
-0.499472
0.142006
0.256328
-0.041568
0.312545
-0.116301
0.018128
-0.040891
0.146484
0.179354
0.236720
0.091230
-0.521388
0.177693
0.103203
-0.320721
-0.044016
0.817928
0.393928
0.823858
0.048442
2.044963
1.065062
0.736462
0.375958
0.614368
0.633935
0.825987
0.897463
1.067507
0.882314
1.197907
0.892784
1.376884
2.899868
0.944579
0.844849
0.666185
0.631160
0.747224
0.895865
0.954074
0.755537
0.925518
0.833151
0.623388
1.034082
0.625255
1.092781
0.797115
1.130748
-0.133873
0.787240
0.994240
1.145457
3.425809
1.392584
1.373268
1.120512
1.099973
0.969927
1.121308
0.926299
1.027462
0.882443
0.675252
1.004502
1.077930
1.391349
1.061776
1.122288
0.995228
0.938614
0.946735
1.014428
1.031852
1.196733
1.020657
1.445655
1.093813
0.953258
1.120480
-0.137631
0.799489
0.995475
1.144004
3.353647
1.392569
1.374541
1.116454
1.086755
0.969073
1.110784
0.930053
1.027469
0.883904
0.702658
1.005196
1.080479
1.408727
1.090422
1.137008
1.012797
0.954767
0.984050
1.018766
1.041555
1.219996
1.014388
1.394282
which the calculated bilateral values are close to 1 indicates that the Bank of
Canada engages in a significant amount of defensive exchange market
intervention with respect to the U.S. dollar. The calculations also show that
the Bank of Canada has, from time to time, allowed the exchange rate to
absorb a significant proportion of existing bilateral exchange market pressure (see, for example, o, for 19X(111), 1977(I), 19X2(11)and 1989(IV)).
Calculating the mean value of W, over the entire sample period yields
(3 = 0.9639 which indicates that, on average, the intervention activities of the
Bank of Canada removed approximately 96% of bilateral exchange market
pressure over the sample period. The sample means associated with
multilateral intervention calculations are 1.0287 for the GlO index and
D.N. Weymark I Journal of International Economics 39 (1995) 273-295
286
Table l(b)
Exchange market pressure and intervention:
1983
1984
1985
1986
1987
1988
1989
1990
1983(1)-1990(W)
Exchange market pressure
Can/US.
G-10
MERM
Degree of intervention
G-10
Can-U.S.
-0.188711
-0.051268
-0.069482
-0.023096
0.072817
0.182689
-0.143251
0.037529
-0.038559
-0.024973
-0.121578
-0.029265
-0.102100
0.048013
0.002433
-0.174005
-0.681319
0.143316
-0.180584
-0.135406
-0.561269
-0.609791
-0.041492
-0.174889
-0.125403
0.213720
-0.130725
-0.031926
0.283903
0.102002
-0.472127
-0.191636
-0.477771
-0.137716
-0.174644
-0.074827
0.139836
0.365520
-0.411064
0.091851
-0.178285
-0.117966
-0.302214
-0.145923
-0.340025
0.160503
-0.008901
-0.443678
-1.637726
0.370785
-0.429941
-0.332823
- 1.324955
-1.456587
-0.059034
-0.421399
-0.272552
0.556484
-0.300194
-0.044497
0.678911
0.299579
-1.172075
-0.529936
0.982194
1.059079
1.020842
1.198398
0.813235
0.840709
1.114596
0.908755
1.679693
1.466900
0.944006
1.481787
1.171342
1.290907
0.663392
0.997510
0.949410
1.025688
0.955501
0.937126
0.939744
0.950571
0.795355
0.937912
0.904824
0.994892
0.929586
0.632890
0.957885
1.101181
0.968512
1.035385
-0.477838
-0.138966
-0.176860
-0.075605
0.139121
0.365516
-0.414373
0.089765
-0.181490
-0.114927
-0.299149
-0.142264
-0.336993
0.162127
-0.006635
-0.443544
-1.634674
0.372488
-0.430598
-0.329715
-1.323918
-1.456595
-0.062997
-0.419403
-0.273526
0.553797
-0.300134
-0.042984
0.681393
0.300047
-1.169230
-0.527247
0.994432
1.001675
1.028163
0.938530
1.091237
1.077243
0.987838
0.974024
0.914878
0.817163
0.983569
0.781441
0.909807
0.980070
-0.623607
1.003236
1.014459
1.011714
1.027302
0.986635
1.021363
1.020205
1.342958
1.002659
1.063493
0.984307
1.037997
1.205141
1.923168
0.959712
1.002593
0.964775
MERM
0.994572
1.010766
1.041209
0.948296
1.085652
1.077231
0.995789
0.951905
0.931323
0.796106
0.973592
0.761849
0.901695
0.989987
0.464862
1.002932
1.012569
1.016362
1.028872
0.977422
1.020564
1.020211
1.433118
0.997909
1.067291
0.979555
1.037787
1.164165
1.026908
0.961209
1.000160
0.959880
1.0282 for the MERM index. The fact that the estimated GlO and MERM
intervention indices have mean values greater than 1 indicates that, over the
sample period, intervention efforts directed towards resisting depreciations
(appreciations) of the Can/U.S. dollar exchange rate generated appreciations (depreciations) of the effective GlO and MERM exchange rates. The
reason for this, as Howitt has observed, is that the Can/U.S. dollar
exchange rate was, on average, inversely related to the weighted average
Canadian dollar price of the currencies belonging to Canada’s other trading
partners.r3
I3 Howitt
(1986), p.120.
D.N. Weymark
I Journal
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281
Although the mean bilateral intervention value of 0.9639 indicates a high
level of intervention by the Bank of Canada, it would not be correct to view
the resulting exchange rate regime as “virtually fixed”. What the high level
of intervention does indicate is a determined effort on the part of the Bank
of Canada to limit the quarter-by-quarter changes in the external value of
the Canadian dollar, while at the same time allowing the Canadian dollar to
drift slowly towards its underlying free-float equilibrium value. In the
context of the model employed in this article, the average time path of the
Can/US. dollar exchange rate that results from the Bank of Canada’s
intervention activities can be described in terms of the difference equation:
e, = e,-, - O.O4(e,-, - Z)
(17)
where e” is the underlying free-float equilibrium value and EMP, = e,-, - Z.
Eq. (17) has the general solution:
e, =(e, - e”)(O.96)‘+ Z
(18)
where e, is the initial value of the Can/US. exchange rate. Eq. (18) makes
it quite clear that the Bank of Canada’s intervention activity allows a
gradual convergence to the underlying free-float equilibrium.
In its reports on exchange rate arrangements, the International Monetary
Fund classifies Canada as “independently floating”. The foregoing discussion suggests that Canada’s exchange rate policy is more appropriately
described as a “managed float”.
7. Bank of Canada exchange rate policy: 1981-1984
This section illustrates the application of measures of exchange market
pressure and intervention activity as tools for policy analysis. A subset of the
values calculated in the foregoing section is used to examine a number of
Howitt’s (1986) observations on the Bank of Canada’s conduct of exchange
rate policy over the period 1981-1984.
In April 1978, the Bank of Canada publicly stated that the external value
of the Canadian dollar was a primary policy objective. In practice, this
meant that Bank of Canada policy was largely directed towards resisting
short-term fluctuations and long-term depreciation in the Can/U.S. exchange rate. The Bank’s resolution to defend the value of the Canadian
dollar was severely tested in three of four years over the period 1981 to
1984. In each case, a loss of confidence in the value of the Canadian dollar
generated strong upward pressure on the Can/U.S. exchange rate. Howitt
(1986) provides an enlightening analysis of the Bank of Canada’s response to
the speculative attacks against the Canadian dollar that occurred in 1981,
1982 and 1984. In this section, estimated values of exchange market pressure
288
D.N. Weymark I Journal of International Economics 39 (1995) 273-295
and the degree of intervention are used to provide further insight into the
actions of the Bank of Canada over the period 1981 to 1984.
Although Howitt contends that the 1981 exchange rate crisis was jointly
initiated early in that year by a drop in the U.S. inflation rate, a sharp rise in
U.S. interest rates, and a loss of confidence in Canadian policy, the bilateral
exchange market pressure calculations suggest that pressure had been
building against the Canadian dollar for some time before that. According
to Table l(a), bilateral exchange market pressure changed from - 2.68% to
8.58% between the third and fourth quarters of 1980. The bilateral figures
also indicate that, in the absence of intervention, the Canadian dollar would
have continued to depreciate in the first three quarters of 1981. The
magnitude of the pressure against the Canadian dollar over this period was
equivalent to successive depreciations of 7.77%, 9.08% and 4.46%.14 The
bilateral intervention estimates show that the exchange market intervention
by the Bank of Canada relieved between 76% and 95% of this exchange
market pressure in the first three quarters of 1981. A comparison of the
observed and imputed exchange rate levels provided in Table 2 gives some
indication of the impact of this intervention.” By intervening in the
exchange market, the Bank of Canada was able to limit the depreciation of
the Canadian dollar to 2.8 cents from its 198O(IV) value of 1.1840 as
compared with the imputed 6.8 cent depreciation that would have accompanied a decision to allow the Canadian dollar to float at the end of
1981(111).
While the short-term Canada-U.S. interest rate differential was observed
to increase steadily from mid-1981 onwards, speculative pressure persisted
Table 2
Observed and imtmted Can/U.S. exchanee rates
1981
1982
1.1936
1.1986
1.2117
1.1918
1.2089
1.2446
1.2499
1.2314
1.2760
1.3020
1.2520
0.9416
1.2941
1.3023
1.0909
1.2003
1983
1984
1.2273
1.2310
1.2328
1.2385
1.2554
1.2925
1.3139
1.3184
0.9990
1.1644
1.1455
1.2043
1.3287
1.4847
1.1073
1.3632
I4 Note that EMP, = Ae,(imp) with Ae,(imp) = e,(imp) - e,-,(obs) so that the calculated
percentages measure the amount of depreciation that would have occurred using last period’s
observed exchange rate as the benchmark.
I5 E,(imp) is calculated as: E,(imp) = [l + EMP,] * E,-,(obs) where the upper case E denotes
the (unlogged) exchange rate value.
D.N. Weymark
I Journal of International
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289
as the Bank expanded domestic credit in both the second and third quarters
of that year. In the fourth quarter, however, the Bank undertook a
contraction of domestic credit that amounted to approximately 5% of the
monetary base thereby ending the speculative pressure against the Canadian
dollar. The exchange market pressure estimate of - 0.222914 indicates that
the domestic credit contraction generated significant upward pressure on the
value of the Canadian dollar in 1981(IV). According to this figure, the
Canadian dollar would have appreciated by 22.3% in the absence of
exchange market intervention. The bilateral intervention measure shows
that intervention by the Bank of Canada accommodated just over 92.5% of
the excess demand for Canadian dollars, allowing the Can/U.S. exchange
rate to settle between its 198O(IV) and 1981(I) values.
It is apparent from the exchange market pressure calculations, that the
respite from the downward pressure on the Canadian dollar was short-lived.
At the end of 1981 a sharp increase in U.S. interest rates led to renewed
speculation against the Canadian dollar. According to Howitt, the federal
government was known to be under considerable pressure to reduce interest
rates to combat Canada’s rising level of unemployment.*6 The exchange
market pressure estimates indicate that this bout of speculative pressure
against the Canadian dollar continued through the second quarter of 1982
and would have generated a 9.3% depreciation had the Bank of Canada not
intervened. As it was, intervention by the Bank of Canada removed
approximately 73% of the excess supply of Canadian currency, limiting the
depreciation to just under 3%. In the third quarter of 1982, the Bank of
Canada ended the crisis by allowing the Canada-U.S. short-term interest
rate differential to rise to 4.5% as U.S. interest rates declined. As was the
case in 1981, the widening of the interest rate differential would have led to
a substantial appreciation of the Canadian dollar in the absence of intervention by the Bank of Canada. It is interesting to note that the bilateral
intervention estimate for 1982(111)is found to be greater than 1 indicating
that the Bank’s intervention more than offset the increase.in the demand for
Canadian currency and actually caused a slight depreciation from the
currency’s 1982(11)value.
There appears to have been a brief resurgence of upward pressure on the
value of the Canadian dollar in the first quarter of 1983. The figures indicate
that the Canadian dollar would have appreciated by 18.9% against the U.S.
dollar in the absence of intervention. Strong intervention by the Bank of
Canada removed just over 98% of the excess demand for Canadian
currency, limiting the observed appreciation to 0.33%. The figures show
that in the second and third quarters of 1983 there was a moderate amount
of upward pressure on the value of the Canadian dollar. The Bank of
I6 Howitt (1986), p.99.
290
D.N. Weymark
I Journal of International
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Canada’s response to this situation is very interesting. Looking at the
bilateral intervention figures reveals that the degree of intervention exceeds
unity for both quarters: o = 1.059079 in 1983(11) and o = 1.020842 in
1983(111). The multilateral measures of exchange market pressure and
intervention tell a similar story. The Bank of Canada was therefore actively
generating a slight depreciation of the Canadian dollar in the face of
international excess demand for Canadian currency. The figures suggest that
Howitt’s conjecture was correct and that the Bank of Canada, seeing no
immediate need to fight inflation or resist depreciation, was engaged in
promoting economic recovery at home during the second and third quarters
of 1983.
The exchange market pressure estimates show that the Bank of Canada’s
expansionary policy caused the international demand for Canadian dollars
to fall steadily throughout 1983. According to Howitt, the Bank intensified
its expansionary efforts in the third quarter of 1983. Although the resulting
reduction in Canadian interest rates caused the demand for Canadian
currency to fall, the exchange market pressure estimate for 1983(IV)
remains negative and provides no indication of an impending speculative
crisis. The figures for the first two quarters of 1984 indicate, however, that
the currency crisis precipitated by the 1983 expansion was more severe than
either of the previous two. In the absence of intervention, the Can1U.S.
exchange rate would have depreciated by 24.6 cents between 1983(IV) and
1984(11).The 1981 and 1982 crises, by comparison, would only have resulted
in reductions of 6.8 cents and 11.0 cents, respectively, over their duration.17
An increase in the Canada-U.S. interest rate differential ended the crisis in
the third quarter of 1984. Once again, the Bank of Canada strongly resisted
the pressure for appreciation that followed the widening of the differential.
The fact that the bilateral estimate exceeds unity in the third quarter of 1984
indicates that the Bank’s intervention more than offset the upward pressure
on the value of the dollar, causing the Canadian dollar to depreciate slightly
against the U.S. dollar. The multilateral measures show, however, that the
Bank was not prepared to allow the Can/U.S. exchange rate to depreciate
enough to prevent Canada’s effective GlO and MERM exchange rates from
appreciating. It seems likely the Bank’s exchange market activity in this
period was the result of a compromise between a more expansionary policy
and price stability.
The foregoing analysis provides some interesting insights into the nature
of speculative attacks and the Bank of Canada’s response to speculative
pressures. The estimates of exchange market pressure and of exchange
market intervention indicate that the Bank of Canada’s response to
“The value of 14.5 cents reflects the difference between E,(imp) in 1982(H) and E,(obs) in
1981(IV).
D.N. Weymark I Journal of International Economics 39 (1995) 273-295
291
speculative crises follows a common pattern. The main characteristics of a
Bank of Canada counter-attack are a substantial widening of the CanadaU.S. interest rate differential followed by a high degree of intervention. In
order to counter a speculative attack successfully, the Bank of Canada has
to send a strong signal (e.g. allow the Canada-U.S. interest rate differential
to widen significantly). When this strategy is successful and speculative
pressure evaporates, the large interest rate differential puts upward pressure
on the Canadian dollar causing the exchange rate to overshoot the Bank’s
target. The Bank then intervenes to eliminate the overshooting. From the
Bank’s perspective, this appears to be an effective strategy, at least in the
short term.
The frequency with which the Canadian dollar was under attack over the
1981-1984 period is even more apparent from monthly estimates of
exchange market pressure than from the quarterly estimates. Monthly
estimates are provided in Appendix 2 for purposes of comparison. It is
interesting to note that the monthly bilateral intervention estimates indicate
that the Bank of Canada used direct exchange market intervention to
defend the Canadian dollar against speculative attacks in January and April
of 1981. The low exchange market pressure estimates for February and May
show that strong intervention by the Bank of Canada ended the speculative
attacks (albeit only temporarily).
8. Conclusion
In this article, bilateral and multilateral estimates of exchange market
pressure and the degree of exchange market intervention were calculated for
Canada over the period 1975 to 1990. The estimated intervention indices
indicate that the Bank of Canada engaged in exchange rate management
throughout the sample period. The estimates also suggest that the bilateral
Can1U.S. exchange rate was the primary target of these intervention
activities. As an illustration of the practical application of such measures to
problems of policy analysis, the estimated values of exchange market
pressure and exchange market intervention were used to analyze the
intervention activities of the Bank of Canada over the period 1981 to 1984.
Howitt’s analysis of Bank of Canada policy was conducted without the
benefit of summary statistics of exchange market pressure and exchange
market intervention. As a consequence, Howitt’s conclusions depend as
much on his intuition about how the economy operates as on the macroeconomic data available to him. What has been shown in this article is that
when an explicit model of a small open economy and model-consistent
summary statistics of exchange market pressure and intervention are
substituted for Howitt’s intuition, Howitt’s conclusions about the conduct of
292
D.N. Weymark / Journal of International Economics 39 (1995) 273-295
Bank of Canada policy are largely supported. The summary statistics
indicate that Howitt was generally correct in his description of the timing
and duration of speculative attacks against the Canadian dollar as well as
Bank of Canada intervention practices. The exchange market pressure
calculations also provide some interesting new information. In particular,
the estimated magnitudes show that the speculative attacks against the
Canadian dollar became progressively more severe over the period 1981 to
1984.
Owing to the simplicity of the model used to generate the modelconsistent estimates, the values obtained in this paper must be viewed with a
certain degree of skepticism. One hopes of course that the essential features
of the model reflect the real world well enough to provide reasonable
estimates of exchange market pressure and the degree of intervention. The
extent to which the results obtained here are sensitive to changes in model
specification will have to be established empirically in future studies.
Acknowledgments
The original version of this article was completed while visiting the
Department of Economics at Johns Hopkins University. I would like to
thank my referees for thoughtful suggestions which have led to significant
improvements. I am also grateful to David Rose, Robert Tetlow and John
Murray of the Bank of Canada for conversations which increased my
understanding of the Bank of Canada’s operations.
Appendix 1: Estimation methodology and results
The Canadian data employed was obtained from Cansim data tapes. U.S.
data was obtained from the Citibase data tapes and the data for other G-10
trading partners was obtained from the IMF’s International Financial
Statistics. Augmented Dickey-Fuller tests were employed to determine the
order of integration of the data series needed to estimate Eqs. (1) and (2).
As all data series were found to be I(l), first differenced data was employed
in both bilateral and multilateral estimations. Spencer and Berk’s (1981)
Wald test was used to test for the exogeneity of y, in Eq. (1). The null
hypothesis of exogeneity could not be rejected at the 5% level of significance.
Al. 1. Bilateral estimation
Bilateral estimates of the coefficient b,, were obtained on the basis of Eq.
(1) using 2SLS with the US. CPI, the 90-day U.S. Treasury Bill rate, and
D.N. Weymark
I Journal
of International
Economics 39 (1995) 273-295
293
Canadian GDP serving as first-stage instruments for the endogenous
Canadian interest rate. Preliminary estimations of Eq. (1) were undertaken
using three alternative monetary aggregates: Ml, MlA, and M2. Because
the highest coefficient determination and the lowest standard errors of the
coefficient estimates were obtained in the MlA regression, further estimation was conducted using the MlA monetary aggregate only. The bilateral
estimate of a2 was obtained using 2SLS to estimate Eq. (2) with the previous
quarter’s exchange rate, the U.S. CPI, the go-day U.S. Treasury Bill rate
and Canadian GDP as first-stage instruments.
The Leung-Box statistic (with four lags) was used to test for the presence
of significant serial correlation in preliminary estimates of Eqs. (1) and (2).
All regressions showed a significant amount of serial correlation. In order to
allow for the possibility of autoregressive and moving average error
processes, 2SLS estimation was undertaken under the alternative assumptions that the errors followed an autoregressive or moving average process
of order 12,with IZ taking on the values of 1 through 4, successively. In each
case, the residual was regressed on four lags of itself and on the relevant
exogenous variables to check for remaining serial correlation. The LeungBox statistic was also recalculated.
Eq. (1) was found to have no significant serial correlation once the data
had been transformed to correct for an MA(4) error process. The final
bilateral estimation results are:
hm, - Ap, = l.l836OAy, - O.l5163Ai,
(2.4217)
(- 3.5932)
R’(obslpred) = 0.2581
where R’(obslpred) denotes the squared correlation coefficient between the
observed and predicted values of the dependent variable, and the figure in
brackets is the t-statistic associated with the coefficient estimate directly
above it.
Eq. (2) was found to have no significant serial correlation once the data
had been transformed to correct for an MA(2) error process. The final
bilateral estimation results are:
Ap, = 0.00773 + 0.54055 Ap,? + O.l7211Ae,
(4.3754) (5.1817)
(4.4717)
R’(obslpred) = 0.5130
Al .2. Multilateral estimation
The bilateral estimation results given above were obtained under the
assumption that Canada is a small open economy with a single trading
partner. The way in which this assumption is incorporated into the
regression analysis is through the interpretation of the variables p: and i: in
Eqs. (2) and (3), respectively and the exchange rate used to estimate Eq.
(2). In the bilateral case, p: is measured in terms of the U.S. price level and
294
D.N. Weymark I Journal of International
Economics 39 (1995) 273-295
if” in terms of the U.S. interest rate level, and the exchange rate employed is
the bilateral Can/U.S. exchange rate. In the multilateral case, it is more
appropriate to measure foreign prices and interest rates as weighted
averages of the price and interest rate levels of a larger number of trading
partners and to use a multilateral exchange rate to estimate Eq. (2). For this
reason multilateral estimation of Eqs. (1) and (2) were carried out using
G-10 weighted averages of foreign prices, interest rates, and exchange rates.
The remaining methodology was identical to that employed in the bilateral
case. The error processes associated with Eqs. (1) and (2) were found to be
MA(4) and MA(3), respectively. Appropriate transformation of the data
yielded the following multilateral estimation results:
Am, - Ap, = 1.26730Ay, - 0.12755 Ai,
(2.6410)
(- 3.0786)
R’(obslpred) = 0.2001
Ap, = 0.00788 + 0.53959 Ap,* - 0.00092 Ae,
(3.7695) (5.1003)
R’(obslpred) = 0.3119
( - 2.7122)
Appendix 2: Bilateral monthly measures
Table 3
Bilateral Monthly Measures
1981
1982
EMP,
0,
E,(oW
E,(imp)
0.122022
0.033088
-0.062696
0.095881
0.015788
0.042244
0.128156
-0.203038
0.085120
0.037958
-0.356180
-0.046918
0.062954
0.193767
0.109tN5
-0.151276
0.135005
-0.006444
-0.053261
-0.143724
-0.036736
0.054383
-0.016779
-0.030320
1.041451
0.797455
0.899641
1.003862
0.463705
0.939464
0.951834
1.046618
1.215911
0.954796
0.963898
0.958944
0.902388
0.907287
0.952283
1.023553
0.944760
6.115595
0.920462
0.863032
0.770556
1.070819
0.819223
1.320558
1.190748
1.198755
1.191236
1.190795
1.200920
1.203995
1.211450
1.222971
1.200700
1.202762
1.187395
1.185110
1.192415
1.214030
1.220396
1.224752
1.233920
1.275277
1.269886
1.245132
1.234681
1.229935
1.226210
1.238186
1.342820
1.230148
1.123598
1.305453
1.209595
1.251651
1.358295
0.965480
1.327071
1.246276
0.774362
1.131685
1.259717
1.423466
1.347094
1.035779
1.390100
1.225968
1.207354
1.087373
1.199391
1.301826
1.209298
1.189031
Note: Monthly
1983
1984
measures were calculated using the bilateral
EMP,
0,
E,Ws)
E,(imp)
-0.107277
-0.095873
0.043467
-0.088263
0.082849
-0.049524
-0.007307
-0.054408
-0.052254
-0.020555
0.028052
0.096208
-0.044856
0.013591
0.117642
0.102185
-0.106508
0.199037
-0.326751
0.116869
0.038431
-0.107904
0.130580
-0.029054
0.926299
0.990401
1.020798
1.054927
1.033009
1.055286
1.026766
1.018528
0.980925
0.978718
0.860099
0.915200
1.026429
1.022223
0.850891
0.928035
1.108604
0.963146
1.046940
1.134108
0.782113
1.031120
1.014287
1.100341
1.228435
1.227305
1.226196
1.232155
1.228790
1.232159
1.232400
1.233643
1.232414
1.231875
1.236719
1.246850
1.248329
1.247952
1.270036
1.279410
1.294295
1.303824
1.323976
1.303387
1.314347
1.318768
1.316310
1.320153
1.105357
1.110661
1.280653
1.117969
1.334238
1.167936
1.223156
1.165347
1.169181
1.207082
1.266432
1.355702
1.190921
1.265296
1.394764
1.399815
1.143143
1.551907
0.877798
1.478708
1.353478
1.172524
1.490973
1.278066
elasticity estimate
i = -3.0889.
D.N. Weymark
I Journal of International
Economics 39 (1995) 273-295
295
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