Empirical Analysis of the Impact of Foreign Exchange Reserves to Economic Growth in Emerging Economics

Krušković, Borivoje D.; Maričić, Tina

doi:10.11114/aef.v2i1.653

Cited by 23 publications

(18 citation statements)

References 17 publications

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“…So that, the excessive foreign exchange reserves is the reason to CPI increase, also we find that the contribution degree of foreign exchange reserves to CPI is more that 20%, that means the influence of foreign exchange reserves is obvious. Krušković and Maričić (2015) analyzed the effect of the accumulation of foreign exchange reserves to economic growth in emerging countries. They utilized balanced panel data methodology for Brazil, China and Russia, for the period from 1993 to 2012.…”

Section: Introductionmentioning

confidence: 99%

An Examination of Foreign Exchange Reserve and Inflation Relationship of Four West African Countries: Evidence from ADRL Model

Drama¹

2016

JFE

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The objective is to provide the empirical evidence regarding the relationships between foreign exchange reserves and inflation for four West African countries namely Cote d'Ivoire, Senegal, Ghana and Nigeria. A comparison of empirical evidence is obtained from the Autoregressive distributive lag model (ARDL) proposed by Pesaran, Shin and Smith (2001) using annual data running the period of 1972 to 2014. The empirical result shows that the relationship between the change in foreign exchange reserves and inflation rate is positive for the countries cited above in long run but the overall short run estimation of our model is insignificant at the conventional level. This means that rise in foreign exchange reserves leads to increase the rate of inflation. Regarding our investigation results, the study suggests that governments of these countries cited above should pay more attention to foreign exchange system management by enlarging open market operations. Moreover, they can use sterilization or other policy instruments to reduce foreign exchange reserves to stabilize domestic economy. According our overall empirical results, we propose the following suggestions. First, the central bank expands the base money supply channels and offers a variety of sterilization methods. Second, reinforce coordination of monetary and fiscal policy, and adopt comprehensive measures to promote the international payments balance. As West African countries' economy is growing rapidly, exchange reserves will still growth and the inflation is an urgent issue too. Therefore, it's still very important for these countries to reduce the negative effect of the excessive foreign exchange reserves.

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Section: Introductionmentioning

confidence: 99%

An Examination of Foreign Exchange Reserve and Inflation Relationship of Four West African Countries: Evidence from ADRL Model

Drama¹

2016

JFE

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“…Kashif et al, (2017) concluded that economic growth has both short-run and long-run relationship with the foreign exchange reserve. The foreign exchange reserve has a positive impact on economic growth, but high economic growth does not support to increase foreign exchange (Kruskovic & Maricic, 2015). Furthermore, the less developed countries set the goal to achieve more foreign currency to achieve higher economic growth.…”

Section: Conceptualizing Foreign Exchange Reservementioning

confidence: 99%

Impact of Foreign Exchange Reserve on Economic Growth in Nepal

Kaphle¹

2021

J. Mgt Devt. Stud.

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This study primarily focuses on the analysis of the contributions of foreign exchange reserve to the economic growth of Nepal by using time series data obtained from the year 1975 to 2018 A.D. In order to assess a relationship between these variables, statistical procedure of unit root test, cointegration and Vector Error Correction Model (VECM) are applied. In addition to the t-statistics, Wald-test for joint significance of coefficients is applied and VECM is performed for testing the impact of the past values of foreign exchange on dependent variables which show the nation’s economic growth. Based on the statistical outcome; Johansen cointegration test indicates the existence of the long-run relationship among variables. The Vector Error Correction outcome and Wald statistics confirm that the past values of foreign exchange have a positive contribution to the economic growth; and foreign exchange reserve has contributed to the economic growth of Nepal.

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“…The motivation for the enhanced increase in the level of foreign exchange reserves in emerging economies in recent years was twofold. On the one hand, increasing security in the event of a currency crisis, while on the other hand it reflects the tendency of policy makers to prevent the appreciation of the exchange rate and maintain the competitiveness of their economies (Krusković & Maričić, 2015). However, central banks do not have the ability to mount up reserves indeterminately.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Causality Between Exchange Rates and Foreign Exchange Reserves: Serbian Case

Marjanović

Marković

2019

FU Econ Org

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The aim of this paper is to determine the relationship between the exchange rate (nominal and real) and foreign exchange reserves based on monthly data for the period from September 2006 to April 2019, using unit root tests and cointegration tests that take into account the possibility of structural break existence. The results of the causality test indicate that there is a long-term relationship between the nominal exchange rate and foreign exchange reserves. On the other hand, the existence of a long-term relationship between the real exchange rate and the foreign exchange reserves has not been confirmed, but there is a short-term causality, that is, the real exchange rate Granger-causes foreign exchange reserves.

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Empirical Analysis of the Impact of Foreign Exchange Reserves to Economic Growth in Emerging Economics

Cited by 23 publications

References 17 publications

An Examination of Foreign Exchange Reserve and Inflation Relationship of Four West African Countries: Evidence from ADRL Model

An Examination of Foreign Exchange Reserve and Inflation Relationship of Four West African Countries: Evidence from ADRL Model

Impact of Foreign Exchange Reserve on Economic Growth in Nepal

Causality Between Exchange Rates and Foreign Exchange Reserves: Serbian Case

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