An Alternative Methodology to Measure the Exchange Market Pressure (Uma Metodologia Alternativa Para Mensuração De Pressão Sobre O Mercado De Cambio)

Estudos Econômicos, Vol. 34, No. 1, pp. 73-99, 2004

27 Pages Posted: 6 Aug 2010 Last revised: 28 Jan 2012

Tito Belchior Silva Moreira

Catholic University of Brasilia

Mauricio Barata de Paula Pinto Sr.

Universidade de Brasília (UnB)

Geraldo Silva Souza

University of Brazil

Date Written: August 4, 2010

Abstract

This article applies multivariate analysis to measure the exchange market pressures in 20 countries, in the context of the Asian crisis of 1997/98. We develop an index of pressure on the exchange market as a weighted average of exchange rate changes, reserve changes and interest rates changes. Changes in the exchange rate enter with positive weights, changes in reserves have negative weights and changes in interest rates have positive weights. These weights are derived from a measure of the communality of each variable used in the analysis. Using a exchange market pressure index we classify the sample, identifying by Ward’s method of cluster analysis, the countries most affected by the crisis initiated in mid 1997. The classification is validated with the use of discriminant analysis.

Notes: Downloadable document is in Spanish.

Keywords: exchange market pressure, Asian crisis, cluster analysis, discriminant analysis

JEL Classification: F31

Suggested Citation

Moreira, Tito Belchior Silva and Pinto, Mauricio Barata de Paula and Souza, Geraldo Silva, An Alternative Methodology to Measure the Exchange Market Pressure (Uma Metodologia Alternativa Para Mensuração De Pressão Sobre O Mercado De Cambio) (August 4, 2010). Estudos Econômicos, Vol. 34, No. 1, pp. 73-99, 2004. Available at SSRN: https://ssrn.com/abstract=1653613 or http://dx.doi.org/10.2139/ssrn.1653613

Tito Belchior Silva Moreira

Catholic University of Brasilia ( email )

SGAN 916 Modulo B
Brasília, DF
Brazil

Mauricio Barata De Paula Pinto Sr.

Universidade de Brasília (UnB) ( email )

Brazil

Geraldo Silva Souza (Contact Author)

University of Brazil ( email )

Campus Universitario Darcy Ribeiro
Brasilia, DF 70919-970
Brazil

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