Measuring the Impact of Intervention on Exchange
Market Pressure
Working Paper No. 06-W04R
Pierre L. Siklos and Diana N. Weymark
ABSTRACT [article]
Abstract: In this article, 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 have been observed if the policy
authority had refrained from intervening and this policy decision had been correctly
anticipated by rational agents. Ex post EMP measures the exchange market pressure under the
policy actually implemented by the policy authority. We use a ratio of these two EMP measures to
assess the effectiveness of sterilized intervention in Canada and Australia.
Keywords and Phrases: Exchange market pressure, exchange rate policy, foreign exchange intervention, Bank of Canada policy, Reserve Bank of Australia policy.
JEL Classification Numbers: F31