Working Paper: CEPR ID: DP15340
Authors: Barry Eichengreen; Alain Naef
Abstract: Using newly assembled data on foreign exchange market intervention, we construct a daily index of exchange market pressure during the 1992-3 crisis in the European Monetary System, allowing us to pinpoint when and where the crisis was most severe. Our analysis focuses on a neglected factor in the crisis: the role of the weak dollar in intra-EMS tensions. We provide new evidence of the contribution of a falling dollar-Deutschmark exchange rate to pressure on EMS currencies
Keywords: foreign exchange market intervention; European Monetary System; currency crisis; ERM
JEL Codes: F31; E5; N14; N24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Depreciation of the dollar (F31) | Increase in exchange market pressure (EMP) on EMS currencies (F31) |
| Depreciation of the dollar (F31) | Increased intervention by central banks (E52) |
| Movements in the dollar-deutschmark exchange rate (F31) | Increase in exchange market pressure (EMP) on EMS currencies (F31) |