Holding International Reserves in an Era of High Capital Mobility

Flood, Robert P.; Marion, Nancy Peregrim

doi:10.1353/btf.2001.0007

Cited by 115 publications

(113 citation statements)

References 38 publications

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“…Extensions of the buffer stock model predict that average optimal reserves depend negatively on the opportunity cost of reserves, and exchange rate flexibility; and positively on GDP, adjustment costs, and reserve volatility, driven frequently by the underlying volatility of international trade. Overall, the literature of the 1980s supported these predictions (Flood and Marion 2002).…”

Section: Buffer Stock Approachmentioning

confidence: 75%

Managing Financial Integration and Capital Mobility-Policy Lessons from the Past Two Decades

Aizenman¹,

Pinto²

2011

Policy Research Working Papers

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract The accumulated experience of emerging markets over the last two decades has laid bare the tenuous links between external financial integration and faster growth on the one hand and the proclivity of such integration to fuel costly crises on the other. These crises have not gone without learning. During the 1990s and 2000s, emerging markets converged to the middle ground of the policy space defined by the macroeconomic trilemma, with growing financial integration, controlled exchange rate flexibility and proactive monetary policy. The OECD countries moved much faster towards financial integration, embracing financial liberalization, opting for a common currency in Europe, and for flexible exchange rates in other OECD countries. Following their crises of 1997-2001, emerging markets added financial stability as a goal, self-insured by building up international reserves and adopted a public finance approach to financial integration. The global crisis of 2008-09, which originated in the financial sector of advanced economies, meant that the OECD "overshot" the optimal degree of financial deregulation while the remarkable resilience of the emerging markets validated their public finance approach to financial integration. The story is not over: with capital flowing in droves to emerging markets once again, history could repeat itself without dynamic measures to manage capital mobility as part of a comprehensive prudential regulation effort. Terms of use: Documents in

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Section: Buffer Stock Approachmentioning

confidence: 75%

Managing Financial Integration and Capital Mobility-Policy Lessons from the Past Two Decades

Aizenman¹,

Pinto²

2011

Policy Research Working Papers

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“…They found that the only significant variables was the reserves volatility, with an elasticity of 0.5 or more in almost all of the regressions [6] Lan and Burke study the determinants of the demand on international reserves for a group of countries during the period 1981-1995. They found that among all variables used in the study, the openness is the most important contributing factor for demand on international reserves [7].…”

Section: Literature Reviewmentioning

confidence: 99%

“…Ball and Reyes re-estimate the model presented by Flood and Marion (2002) to investigate about the significant of interest rate as a determinant of the optimal reserves under different monetary systems [12]. They argue that interest rates did not have a significant effect under the fixed exchange rate system because of the endogeneity problem between interest rates and international reserve holdings.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Despite the fact that gold is one of basic components of foreign reserves held by the country, but the relative importance of this component decreased [6]. This vision about excluding gold because whether central bank consider gold as liquid as foreign currency holding to be used it as an intervention asset.…”

Section: An Over View Of Egyptian Reserve Holdingsmentioning

confidence: 99%

“…It means that the authority is willing to stockpile a large amount of reserves and tolerate greater opportunity cost in order to incur less adjustment cost. The equation also shows that a higher opportunity cost reduces reserve holdings while a bigger adjustment cost increases them [6]. In The empirical works the estimation equation becomes as follows: (4) where is white noise We extended the model presented by Frenkel and Jovanovic (1981) to incorporate some additional variables which are important in determining the level of international reserves for Egypt.…”

Section: A the Basic Modelmentioning

confidence: 99%

See 2 more Smart Citations

Reserve Holdings and Macroeconomic Variables: An Empirical Dynamic Analysis in Egyptian Economy

Badr¹,

El-khadrawi²

2015

IJTEF

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Abstract-This study aims to investigate the long run relationship of international reserves holding in Egypt using the buffer stock model presented by Frenkel and Jovanovic (1981). The study employed quarterly data from 1990Q1 to 2012Q4. A robust time series technique autoregressive distributed lag (ARDL) was used which is applicable irrespective of whether the regressors are purely I (0) or purely I (1). The evidence derived from the ARDL approach support the fact that the scale variables and the volatility variable have significant effects on the reserve demand. The evidence also demonstratesthat both exchange rate flexibility and opportunity cost does not have any significant impact on the reserve demandin Egypt.Index Terms-International reserve holdings, Egyptian economy, autoregressive distributed lag (ARDL).

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International risk-sharing and currency unions: The CFA zones

Yehoue

2010

J. Int. Dev.

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Holding International Reserves in an Era of High Capital Mobility

Cited by 115 publications

References 38 publications

Managing Financial Integration and Capital Mobility-Policy Lessons from the Past Two Decades

Managing Financial Integration and Capital Mobility-Policy Lessons from the Past Two Decades

Reserve Holdings and Macroeconomic Variables: An Empirical Dynamic Analysis in Egyptian Economy

International risk-sharing and currency unions: The CFA zones

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