Abstract
This article illustrates the method by which measures of exchange market pressure and the degree of intervention can be obtained and applied as tools for policy analysis. Using a fairly simple model of a small open economy with rational expectations, quarterly measures of exchange market pressure and the degree of intervention are calculated for the Canadian economy over the period 1975 to 1990. A subset of these calculated values is then employed to analyze the Bank of Canada's conduct of exchange rate policy over the period 1981 to 1984.
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