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The Demand for International Reserves in China: An ECM Model with Domestic Monetary Disequilibrium

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  • Ford, J L
  • Huang, Guobo
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    Abstract

    This paper employs a version of the error correction model to investigate the demand for international reserves in a typical planned economy, China. Disturbances from the domestic markets are considered by incorporating the monetary disequilibrium into the model. The authors' main conclusions are that (1) reserve holdings in China have maintained a long-run relationship and a stable dynamic relationship with several determinants since the 1950s, confirming China's prudential foreign reserve policy; and (2) monetary disequilibrium has significant short-run effects on reserve holdings, reflecting the authorities' 'general balancing' policy in their annual planning. Copyright 1994 by The London School of Economics and Political Science.

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    Bibliographic Info

    Article provided by London School of Economics and Political Science in its journal Economica.

    Volume (Year): 61 (1994)
    Issue (Month): 243 (August)
    Pages: 379-97

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    Handle: RePEc:bla:econom:v:61:y:1994:i:243:p:379-97

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    Cited by:
    1. Huang, Tai-Hsin & Shen, Chung-Hua, 1999. "Applying the seasonal error correction model to the demand for international reserves in Taiwan," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 107-131, January.
    2. Mishra, Ritesh Kumar & Sharma, Chandan, 2011. "India's demand for international reserve and monetary disequilibrium: Reserve adequacy under floating regime," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 901-919.
    3. Prabheesh, K P & Malathy, D & Madhumathi, R, 2007. "Demand for Foreign Exchange Reserves in India: A Co-integration Approach," MPRA Paper 13969, University Library of Munich, Germany.
    4. Marc-André Gosselin & Nicolas Parent, 2005. "An Empirical Analysis of Foreign Exchange Reserves in Emerging Asia," Working Papers 05-38, Bank of Canada.

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