Working Paper: NBER ID: w29488
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: European Monetary System; exchange market pressure; foreign exchange market intervention; dollar-deutschmark exchange rate
JEL Codes: F0; F3; F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Dollar's depreciation (F31) | Exchange market pressure on EMS currencies (F31) |
| Falling dollar-deutschmark exchange rate (F31) | Exchange market pressure on EMS currencies (F31) |