Modelling Market Pressure and Intervention Index for Pakistan Using Cointegration Approach

Abstract

To work with a model based approach to Exchange Market Pressure, estimation on level data may be spurious. This paper addresses that issue by utilizing a Cointegration framework to estimate parameters of a Weymark's (1995) model. Based on Weymark (1995) model's estimated parameters, an exchange market pressure and an intervention index is constructed. The results indicate downward pressure and active Central Bank intervention. Post reform period shows a drop in market pressure and the central bank foreign exchange intervention. An intervention index mean value for the entire period suggests that foreign exchange reserves relieved most of the pressure. This has an important policy implication that monetary authorities in Pakistan are not independent in formulating an effective monetary policy.

Determinants of Sectoral Growth in Pakistan:A KalmanFilter Based Time Varying Parametric Approach

“…Moosa (1997),and Gilal & Chandio (2013) used 14 and 9 observation windows for rolling regression estimates respectively.3 We can see four types of cycles (a) Kondratieff wave or long technological cycle that has 45 to 60 years' duration. (b) Kuznets cycle that has 5 to 25 years' duration.…”