Accumulation of Foreign Exchange Reserves and Long Term Growth

Polterovich, Victor; Popov, Vladimir

doi:10.2139/ssrn.1751866

Cited by 63 publications

(77 citation statements)

References 33 publications

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“…The literature on the relationship between foreign exchange reserve accumulation and growth is large (see, for example, Polterovich and Popov, 2003). Polterovich and Popov probed the relationship between foreign exchange reserves and growth in four Asian emerging countries, and estimated that the accumulation of foreign exchange reserves lowers values of exchange rates, which in turn induces export-led growth, in a classical beggar-thy-neighbor policy.…”

Section: The Relationship Between Foreign Exchange Reserves and Growthmentioning

confidence: 99%

Foreign Exchange Reserves and the Macro-economy in the GCC Countries

Azar

Aboukhodor

2017

AFR

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This research looks into the accumulation of foreign exchange reserves and the development of the macro-economy in the Gulf and Cooperation Council countries (GCC countries), namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Using yearly data covering the period from 1996 through 2015, the empirical results show positive and significant relationships between foreign exchange reserves accumulation on one hand, and oil prices, GDP, the ratio of current account to GDP, and the ratio of broad money to GDP on the other hand. Moreover, the results point to negative and significant relationships between foreign exchange reserves accumulation on one hand, and real effective exchange rate, the ratio of debt to GDP, and call money rates on the other hand. However, the results show that the stockpile of foreign exchange reserves in the GCC countries is not sensitive to nominal effective exchange rates, neither to the ratio of imports to GDP, and nor to interest rates on the US Dollar. Furthermore, the study shows a robust and positive link between foreign exchange reserves and oil prices on the one hand and economic growth in these countries on the other hand.

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Section: The Relationship Between Foreign Exchange Reserves and Growthmentioning

confidence: 99%

Foreign Exchange Reserves and the Macro-economy in the GCC Countries

Azar

Aboukhodor

2017

AFR

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“…An interesting example is the study by Hausmann et al (2003) which identi…ed and analyzed determinants of 'growth episodes' in the latter half of the twentieth century and found that real exchange depreciations tend to precede sustained growth spurts. Other work includes Razin and Collins (1997), Polterovich and Popov (2002), Levi-Yeyati and Sturzenegger (2007), Gala (2007), Rodrik (2008), and Berg et al (2008). This emerging body of empirical evidence -along with East Asia's rapid accumulation of reserves in the pursuit of what is widely seen as 'export-led growth' -has stimulated interest in the theoretical linkages between the real exchange rate and growth.…”

Section: Introductionmentioning

confidence: 99%

The real exchange rate and economic development

Razmi

Rapetti

Skøtt

2012

Structural Change and Economic Dynamics

142

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Recent empirical studies have found a robust correlation between competitive exchange rates and economic growth in developing economies. This paper presents (i) a formal model to help explain these findings and (ii) econometric evidence on the relation between investment and the real exchange rate. The model emphasizes the existence of (hidden) unemployment as a source of endogenous growth, even under constant returns to scale. Growth promoting policies, however, affect the external balance, and two instruments are needed in order to achieve targets for both the growth rate and the trade balance. The real exchange rate can serve as one of those instruments. The implications of the model for the relation between real exchange rates and the rate of capital accumulation find support in our econometric analysis.JEL classification: F43, O11, O41

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“…Undervaluation of the exchange rate via accumulation of reserves became in fact the major tool of export-oriented industrial policy (Polterovich and Popov 2004). 1985 1989 1995 1978 1985 1994 1989 1996 the second half of the 1980s, whereas in the first stage of transition the government spending was growing pretty much in line with GDP.…”

Section: Liberalization Without Destruction Of State Institutionsmentioning

confidence: 99%

Lessons from the Transition Economies Putting the Success Stories of the Postcommunist World into a Broader Perspective

Popov

2011

SSRN Journal

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Why many transition economies succeeded by pursuing policies that are so different from the radical economic liberalization (shock therapy) that is normally credited for the economic success of central European countries? First, optimal policies are context dependent, they are specific for each stage of development and what worked in Slovenia cannot be expected to work in Mongolia. Second, even for countries at the same level of development, reforms needed to stimulate growth are different; they depend on the previous history and on the path chosen. The reduction of government expenditure as a share of GDP did not undermine significantly the institutional capacity of the state in China, but in Russia and other CIS states it turned out to be ruinous. It is the growth diagnostics that should reveal the missing ingredient for economic growth. Finally, and most important, introducing this 'missing ingredient' should not result in the destruction of other preconditions for growth. The art of the policymaker is to create markets without causing the government failure, as happened in many CIS countries.

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Accumulation of Foreign Exchange Reserves and Long Term Growth

Cited by 63 publications

References 33 publications

Foreign Exchange Reserves and the Macro-economy in the GCC Countries

Foreign Exchange Reserves and the Macro-economy in the GCC Countries

The real exchange rate and economic development

Lessons from the Transition Economies Putting the Success Stories of the Postcommunist World into a Broader Perspective

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