Cointegration Approach to Estimation of the Exchange Market Pressure in Slovakia

In this paper cointegration approach is applied to calculate exchange market pressure in Slovakia before joining the Eurozone. The results of empirical investigation shall be useful for Poland, Czech and Hungary, which are still prior to joining the Exchange Rate Mechanism II.

Model-dependent approach is preferred to model-independent approach in this paper. Economic relations are decomposed into short- and long-run and therefore the results are more credible. The results of empirical investigation show that excessive values of the estimated EMP resulted from foreign exchange interventions, speculative attacks and correction after depreciation of the Euro.