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Searching for Indicators of Foreign Exchange Market Pressure: Evidence from Greece

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  • Karfakis, Costas
  • Moschos, Demetrios

Abstract

This paper uses vector autoregressive (VAR) techniques to examine the indicator properties of a number of macroeconomic variables with respect to foreign exchange (FX) market pressure in Greece during the period 1975-95. The framework of analysis is also used to assess the relative importance of the associated shocks as sources of fluctuations in the FX market pressure index (FXI). The Granger causality results show that the real overvaluation of the drachma, the reserves adequacy ratio, the current account balance and the net capital movements have predictive power with respect to the FX market pressure. The results of variance and historical decompositions show that shocks attributable to real overvaluation, the reserve adequacy ratio and the net capital movements are the dominant sources of volatility in the FXI. Copyright @ 1999 by John Wiley & Sons, Ltd. All rights reserved.

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  • Karfakis, Costas & Moschos, Demetrios, 1999. "Searching for Indicators of Foreign Exchange Market Pressure: Evidence from Greece," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(1), pages 63-73, January.
    • Handle: RePEc:ijf:ijfiec:v:4:y:1999:i:1:p:63-73
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    Cited by:

    1. Tassos Anastasatos & Constantina Manou, 2008. "Speculative Attacks on the Drachma and the Changeover to the Euro," Economic Bulletin, Bank of Greece, issue 31, pages 49-77, November.
    2. Devendra Kumar Jain & Rup Singh & Arvind Patel & Ronal Chand, 2023. "Foreign exchange market asymmetries in Pacific small island developing states: Evidence from Fiji," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(4), pages 4353-4364, October.

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