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A Cross-Country Empirical Analysis of International Reserves

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  • Yin-Wong Cheung
  • Hiro Ito

Abstract

Using data from more than 100 economies for the period of 1975 to 2005, we conduct an extensive empirical analysis of the determinants of international reserve holdings. Four groups of determinants, namely, traditional macro variables, financial variables, institutional variables, and dummy variables that control for individual economies' characteristics are considered. We find that the relationship between international reserves and their determinants is significantly different between developed and developing economies and is not stable over time. The estimation results indicate that, especially during the recent period, a developed economy tends to hold a lower level of international reserves than a developing one. Furthermore, there is only limited evidence that East Asian economies including China and Japan are accumulating an excessive amount of international reserves.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Economic Journal.

Volume (Year): 23 (2009)
Issue (Month): 4 ()
Pages: 447-481

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Handle: RePEc:taf:intecj:v:23:y:2009:i:4:p:447-481

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Keywords: Developed versus developing economies; excess hoarding; macro determinants; financial factors; institutional variables;

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Citations

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Cited by:
  1. Aizenman, Joshua & Glick, Reuven, 2008. "Sovereign Wealth Funds: Stylized Facts about their Determinants and Governance," Santa Cruz Department of Economics, Working Paper Series qt1fj4b203, Department of Economics, UC Santa Cruz.
  2. Michael Funke & Marc Gronwald, 2009. "A Convex Hull Approach to Counterfactual Analysis of Trade Openness and Growth," CESifo Working Paper Series 2692, CESifo Group Munich.
  3. Joshua Aizenman & Kenta Inoue, 2012. "Central Banks and Gold Puzzles," NBER Working Papers 17894, National Bureau of Economic Research, Inc.
  4. Giulio Cifarelli & Giovanna Paladino, 2009. "The Buffer Stock Model Redux? An Analysis of the Dynamics of Foreign Reserve Accumulation," Open Economies Review, Springer, vol. 20(4), pages 525-543, September.
  5. Joseph Joyce & Raul Razo-Garcia, 2011. "Reserves, quotas and the demand for international liquidity," The Review of International Organizations, Springer, vol. 6(3), pages 393-413, September.
  6. Yin-wong Cheung & Hiro Ito, 2008. "Hoarding of International Reserves: A Comparison of the Asian and Latin American Experiences," Working Papers 072008, Hong Kong Institute for Monetary Research.
  7. Yin-Wong Cheung & Rajeswari Sengupta, 2010. "Accumulation of Reserves and Keeping Up with the Joneses: The Case of LATAM Economies," Working Papers 212010, Hong Kong Institute for Monetary Research.
  8. Sona Benecka & Lubos Komarek, 2014. "International Reserves: Facing Model Uncertainty," Working Papers 2014/03, Czech National Bank, Research Department.

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