This novel empirical study contributes to the literature on the foreign exchange market and financial liberalisation. We examine the determinants of Exchange Market Pressure (EMP) in a panel of forty countries, using a statistical approach to measure market pressure, with particular focus upon the impact of capital controls. We also consider whether EMP is related to a range of other macroeconomic indicators, policy variables and trade openness. We find that capital controls are associated with weaker currencies, especially for advanced countries. Our results are robust to potential endogeneity and different measures of exchange market pressure.
|Number of pages||12|
|Journal||Journal of International Financial Markets, Institutions and Money|
|Early online date||15 Apr 2015|
|Publication status||Published - Jul 2015|
- Exchange market pressure
- Capital controls
- Monetary policy