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Comparison of Exchange Market Pressure Across the New Part of the European Union

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  • Daniel Stavárek

Abstract

In this paper, we choose the correct model specification for eight European Union new member states (NMS) to estimate the exchange market pressure (EMP) for the period 1995-2009. The results suggest that the growth of domestic credit and the money multiplier had a significantly positive effect on EMP. Furthermore, EMP in many NMS was determined by foreign disturbances, namely, the eurozone's money supply, foreign capital inflow, and interest rate differential. EMP in most NMS with a flexible exchange rate regime was primarily absorbed by changes in international reserves. Along with fundamentally stable EMP development in recent years, this forms a solid basis for potential fulfillment of the exchange rate stability convergence criterion.

Suggested Citation

  • Daniel Stavárek, 2011. "Comparison of Exchange Market Pressure Across the New Part of the European Union," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(0), pages 21-39, July.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:0:p:21-39
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    Cited by:

    1. Hegerty, Scott W., 2012. "Money market pressure in emerging economies: International contagion versus domestic determinants," Economic Systems, Elsevier, vol. 36(4), pages 506-521.

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