Book contents
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of symbols
- 1 Introduction
- Part I Monetary standards
- Part II Exchange rate
- Part III Gold points
- Part IV External and internal integration
- Part V Market efficiency
- Part VI Regime efficiency
- 14 Market forces
- 15 Policy variables
- 16 Net outcome
- Part VII Conclusions
- Notes
- References
- Index
16 - Net outcome
Published online by Cambridge University Press: 13 October 2009
- Frontmatter
- Contents
- List of figures
- List of tables
- Preface
- List of symbols
- 1 Introduction
- Part I Monetary standards
- Part II Exchange rate
- Part III Gold points
- Part IV External and internal integration
- Part V Market efficiency
- Part VI Regime efficiency
- 14 Market forces
- 15 Policy variables
- 16 Net outcome
- Part VII Conclusions
- Notes
- References
- Index
Summary
Methodology of measuring regime efficiency
Determinants of regime efficiency
The efficiency bands of the various operations – gold-point arbitrage, uncovered interest arbitrage, covered interest arbitrage, and joint “forward speculation with covered interest arbitrage” – the extent to which the operations are efficient (within the respective bands), and the influences of the various market and policy variables combine with the determinants of external and internal integration to generate a certain level of regime efficiency. So interest now extends beyond 1925–31 to 1791–1931, 1950–66 – the entire time span of the study. What is the appropriate measure of the extent of regime efficiency?
A simple measure of efficiency
Perfect regime efficiency is defined as the exchange rate at the mid-point of the gold-point spread. At this point it is convenient to revert to expressing the exchange rate in percentage points of parity and as the deviation from the spread mid-point: R* as developed in section 1 of chapter 11. So perfect regime efficiency is given by R* = 0. A simple measure of the amount of regime inefficiency is then |R*|. This is the experienced (observed) deviation of the exchange rate from the spread mid-point. For a given period of time with a time series of |R*|, the average of the deviations may be taken; so the measure of inefficiency becomes mean |R*|.
- Type
- Chapter
- Information
- Between the Dollar-Sterling Gold PointsExchange Rates, Parity and Market Behavior, pp. 267 - 276Publisher: Cambridge University PressPrint publication year: 1996