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Monetary Policy and International Reserves: Empirical Evidence from East Asian Countries

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  • Prakash K. Shrestha
  • Willi Semmler

Abstract

This paper estimates a monetary policy reaction function with international reserves as an additional variable in the five crisis‐affected East Asian countries by using an autoregressive distributed lag approach. An inclusion of international reserves in the reaction function seems to be justified on the ground that small open economies have to consider external constraint and financial stability in addition to conventional macroeconomic stability. Empirical findings suggest that monetary policy significantly reacts to the level of international reserves in these countries, particularly in the post‐crisis period, reflecting a fact that the conventional Taylor rule does not properly explain the monetary policy reaction in emerging economies. Copyright © 2014 John Wiley & Sons, Ltd.

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  • Prakash K. Shrestha & Willi Semmler, 2015. "Monetary Policy and International Reserves: Empirical Evidence from East Asian Countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 20(3), pages 191-205, July.
    • Handle: RePEc:wly:ijfiec:v:20:y:2015:i:3:p:191-205
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    Cited by:

    1. Akosah, Nana Kwame & Alagidede, Imhotep Paul & Schaling, Eric, 2020. "Testing for asymmetry in monetary policy rule for small-open developing economies: Multiscale Bayesian quantile evidence from Ghana," The Journal of Economic Asymmetries, Elsevier, vol. 22(C).
    2. Muhammad Arshad Khan & Ather Maqsood Ahmed, 2016. "Conducting Monetary Policy in South Asian Economies: An Investigation," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(3), pages 161-190.
    3. H. Kent Baker & Satish Kumar & Kirti Goyal & Prashant Gupta, 2023. "International journal of finance and economics: A bibliometric overview," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 9-46, January.

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