Authors: Dr Muhammad Akram Gilal Dr Ghulam Akbar Mahesar Dr Shuja Ahmed Mahesar
Abstract: In this paper, we reviewed empirical exchange market pressure indices. The objective was to find out similarities and differences among them in terms of their components and weights assigned to them. The review shows that apart from Girton and Roper (1977) rest of three pressure indices are model dependent. However, they require estimation of different number of parameters for assigning weight to their components. Roper and Turnovsky (1980) require estimation of six parameters. Weymark (1995) and Pentecost et al. (2001) on the other hand requires estimation of two and one parameter for assigning weight to foreign exchange reserve and relative interest rate differential component of market pressure index.