The Optimal Demand For Foreign Exchange Reserves In Pakistan
AbstractUsing monthly data on foreign exchange reserves from June 1995 through June 2005, we find that in line with other country-specific studies the opportunity cost of holding reserves played a greater role than reserve volatility in determining the level of reserves in Pakistan. Our finding is in contrast with the hypothesis of increased capital mobility that is commonly set forth in explaining the precautionary motive for reserve holdings. As also pointed by Ramachandran (2004), this result could perhaps be attributed to the fact that capital outflow in Pakistan (as also in India) is not as free as capital inflow and a large part of the recent reserve accumulation is due to non-debt reserve inflows.
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Bibliographic InfoArticle provided by Euro-American Association of Economic Development in its journal International Journal of Applied Econometrics and Quantitative Studies .
Volume (Year): 5 (2008)
Issue (Month): 1 ()
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Web page: http://www.usc.es/economet/eaa.htm
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
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- Aizenman, Joshua & Marion, Nancy, 2003.
"The high demand for international reserves in the Far East: What is going on?,"
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Elsevier, vol. 17(3), pages 370-400, September.
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- Joshua Aizenman & Nancy Marion, 2002. "The high demand for international reserves in the Far East: what's going on?," Pacific Basin Working Paper Series 2002-08, Federal Reserve Bank of San Francisco.
- Joshua Aizenman & Nancy Marion, 2002. "The High Demand for International Reserves in the Far East: What's Going On?," NBER Working Papers 9266, National Bureau of Economic Research, Inc.
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- Karim Khan & Eatzaz Ahmed, 2005. "The Demand for International Reserves: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 939-957.
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