Exchange Market Pressure and De Facto Exchange Rate Regime  in the Euro-Candidates

by Stavarek, Daniel
Published in Romanian Journal of Economic Forecasting
, 2010, volume 13 issue 2, 119-139

 Requires a PDF viewer such as Xpdf or Adobe Acrobat Reader


In this paper we estimate exchange market pressure (EMP) in four euro-candidate countries over the period 1995-2008. We apply model-dependent as well as modelindependent approach to the EMP estimation. Since all euro-candidates have to fulfil the exchange rate stability convergence criterion we analyze EMP in context of exchange rate arrangement and develop a continuous measure of de facto exchange rate regime. The paper provides no evidence of serious relationship between EMP and de facto regime. Therefore, the shift towards ERM II should not stimulate EMP to growth and pose an a priori threat to fulfillment of the exchange rate stability criterion.

Keywords: exchange market pressure; de facto exchange rate regime; eurocandidate countries; ERM II
JEL Classification:
C32; E42; F31; F36