چکیده:
In this paper, we will review the foreign exchange market and will try
to extract an exchange market pressure and an intervention index for
Iran by following the Weymark (1995) approach to evaluate the
Central Bank of Iran’s exchange rate policy during 1368:Q1 to
1391:Q3. The estimation method employed, is the econometric
technique known in the literature as the Two-Stage Least Squares
(2SLS).The exchange market pressure’s mean value of 0.062 provides
evidence that depreciating pressure remained dominant over the entire
sample period. Also, the mean value of the intervention index is 0.44,
indicating that the foreign exchange reserve and exchange rate changes
absorbed forty-four and fifty-six percent of the pressure, respectively.
Otherwise the results of the paper show that on an average there was a
downward pressure on Iran’s currency and the Central Bank of Iran
pursued an active intervention policy. Specifically, as the intervention
index shows, the Central Bank of Iran used both exchange rate and
foreign exchange reserve interventions for restoring the foreign
exchange market to equilibrium levels, a policy known as the managed
float exchange rate regime.
خلاصه ماشینی:
"Exchange Market Pressure and the Degree of Exchange Market Intervention: The Case of Iran Mahmoud Baghjari1, Reza Najarzadeh2 Received:5/12/2012 Accepted:27/1/2014 Abstract In this paper, we will review the foreign exchange market and will try to extract an exchange market pressure and an intervention index for Iran by following the Weymark (1995) approach to evaluate the Central Bank of Iran’s exchange rate policy during 1368:Q1 to 1391:Q3.
Under a complete fixed exchange rate regime, the central bank has to defend the committed parity with, in principle, unlimited purchases or sales of foreign exchange in case of excess demand for or excess supply of domestic currency.
(1975) argued that under a managed float, the effective exchange rate and foreign exchange reserve changes reflect the extent of money market disequilibrium although no one had yet constructed a single composite index to measure it.
Based on the assumptions of fixed prices and perfect capital mobility, they derived the optimum trade-off that monetary authorities face between exchange rate and foreign exchange reserve changes for relieving pressure on the domestic currency.
It shows that the current money supply is determined by inherited money stock ( s negative sign of monetary authority’s response function indicates that Central Bank’s smooth exchange rate changes by selling and purchasing foreign exchange reserves.
We define an intervention reveals the monetary authority’s leaning with the wind in that the central bank purchased foreign exchange reserves when there was already a downward pressure on index as the fraction of pressure that domestic currency."