Macro/Finance Group, NIPFP

An exchange market pressure measure for cross country analysis

An exchange market pressure measure for cross country analysis, Ila Patnaik, Joshua Felman and Ajay Shah. Journal of International Money and Finance, February 2017 (forthcoming)

EMP measures in the existing literature are oriented towards applications in crisis dating and prediction. We propose a modified EMP measure where cross-country comparisons are possible. This is the sum of the observed change in the exchange rate with an estimated counterfactual of the magnitude of the change in the exchange rate associated with the observed currency intervention. We construct a multi-country dataset for EMP in each month. This opens up many new research possibilities.

Links

To get working with the dataset, here's a short demo R code for loading the dataset and plotting the EMP values for any of the 139 countries in our dataset:

## 1) Read the data
library(zoo)
emp.dat <- read.csv("http://macrofinance.nipfp.org.in/FILES/PFS2017_EMP_allcountries.csv")

## 2) Split the dataset by country name
emp.dat.list <- split(emp.dat,emp.dat$country)

## 3) Plot the time-series of EMP values for China
cn.emp <- emp.dat.list$cn.curr
cn.emp <- zoo(cn.emp[,-1],as.Date(cn.emp[,1]))

plot(window(cn.emp$curr.emp,start="2004-01-01",end="2012-12-01"),ylab="% change in exchange rate",xlab="",type="h",col="midnight blue",ylim=c(-15,15))

The graph for EMP values of China looks like this:

Figure 1: Exchange Market Pressure (EMP) values for China