인도·남아시아

To work with a model based approach to Exchange Market Pressure, estimation on level data may be spurious. This paper addresses that issue by utilizing a Cointegration framework to estimate parameters of a Weymark’s (1995) model. Based on Weymark (1995) model’s estimated parameters, an exchange market pressure and an intervention index is constructed. The results indicate downward pressure and active Central Bank intervention. Post reform period shows a drop in market pressure and the central bank foreign exchange intervention. An intervention index mean value for the entire period suggests that foreign exchange reserves relieved most of the pressure. This has an important policy implication that monetary authorities in Pakistan are not independent in formulating an effective monetary policy.