MEASURING THE DEGREE OF EXCHANGE MARKET INTERVENTION IN A SMALL OPEN-ECONOMY

In this article, I introduce an index of intervention activity which c an be calculated on the basis of observed data. This intervention inde x measures intervention activity as the proportion of exchange market pressure relieved by exchange market intervention. The properties of t he intervention index are established analytically using a model of a small open economy with rational expectations. The index is used to ca lculate measures of bilateral and multilateral intervention for Canada over the period 1975-1990. (JEL F31). (C) 1997 Elsevier Science Ltd.