IDEAS home Printed from https://ideas.repec.org/p/chb/bcchwp/924.html
   My bibliography  Save this paper

Reserve Accumulation and Capital Flows: Theory and Evidence from Non-Advanced Economies

Author

Listed:
  • Juan Pablo Ugarte

Abstract

Capital flows can have destabilizing effects in economies connected to the global financial system. Research has shown that external factors tend to explain most of these movements during episodes of financial turmoil, while country-specific determinants are able to explain heterogeneity throughout the recovery. This paper seeks to understand how reserve accumulations affect real and financial variables. For this purpose, a theoretical framework based on an extended version of the Mundell-Fleming model is presented and its predictions are tested with empirical evidence. Our results suggest that, under a flexible exchange rate regime, an accumulation of reserves generates net capital inflows with limited effects on the real economy. Specifically, we find that an accumulation of reserves of 1% of GDP would increase net capital flows about 0.81%.

Suggested Citation

  • Juan Pablo Ugarte, 2021. "Reserve Accumulation and Capital Flows: Theory and Evidence from Non-Advanced Economies," Working Papers Central Bank of Chile 924, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:924
    as

    Download full text from publisher

    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_924.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael R. M. Abrigo & Inessa Love, 2016. "Estimation of panel vector autoregression in Stata," Stata Journal, StataCorp LP, vol. 16(3), pages 778-804, September.
    2. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kazemzadeh, Emad & Fuinhas, José Alberto & Koengkan, Matheus & Shadmehri, Mohammad Taher Ahmadi, 2023. "Relationship between the share of renewable electricity consumption, economic complexity, financial development, and oil prices: A two-step club convergence and PVAR model approach," International Economics, Elsevier, vol. 173(C), pages 260-275.
    2. Hou, Xiaohui & Li, Shuo & Li, Wanli & Wang, Qing, 2018. "Bank diversification and liquidity creation: Panel Granger-causality evidence from China," Economic Modelling, Elsevier, vol. 71(C), pages 87-98.
    3. Cepni, Oguzhan & Gul, Selcuk & Gupta, Rangan, 2020. "Local currency bond risk premia of emerging markets: The role of local and global factors," Finance Research Letters, Elsevier, vol. 33(C).
    4. Na Zhang & Jinqian Deng & Fayyaz Ahmad & Muhammad Umar Draz & Nabila Abid, 2023. "The dynamic association between public environmental demands, government environmental governance, and green technology innovation in China: evidence from panel VAR model," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(9), pages 9851-9875, September.
    5. Md. Mizanur Rahman & Tahsin Binta Anis, 2023. "Government expenditure on education and economic growth: a panel data analysis," Journal of Community Positive Practices, Catalactica NGO, issue 2, pages 30-46.
    6. Qureshi, Fiza & Khan, Habib Hussain & Rehman, Ijaz Ur & Ghafoor, Abdul & Qureshi, Saba, 2019. "Mutual fund flows and investors’ expectations in BRICS economies: Implications for international diversification," Economic Systems, Elsevier, vol. 43(1), pages 130-150.
    7. Ashima Goyal & Akhilesh K. Verma & Rajeswari Sengupta, 2022. "External shocks, cross-border flows and macroeconomic risks in emerging market economies," Empirical Economics, Springer, vol. 62(5), pages 2111-2148, May.
    8. António Afonso & Eduardo Rodrigues, 2024. "Is public investment in construction and in R&D, growth enhancing? A PVAR approach," Applied Economics, Taylor & Francis Journals, vol. 56(24), pages 2875-2899, May.
    9. Marwil J. Dávila-Fernández, 2018. "Alternative Approaches to Technological Change when Growth is BoPC," Department of Economics University of Siena 795, Department of Economics, University of Siena.
    10. Suah, Jing Lian, 2020. "Uncertainty and Exchange Rates: Global Dynamics (Well, I Don't Quite Know Anymore)," MPRA Paper 109087, University Library of Munich, Germany.
    11. Lee, Hyoungjin & Park, Junmin & Chung, Chris Changwha, 2022. "CEO compensation, governance structure, and foreign direct investment in conflict-prone countries," International Business Review, Elsevier, vol. 31(6).
    12. Kaelo Mpho Ntwaepelo, 2021. "The Effects of Macroprudential and Monetary Policy Shocks in BRICS economies," Economics Discussion Papers em-dp2021-20, Department of Economics, University of Reading.
    13. Dimitrios Karamanis, 2022. "Defence partnerships, military expenditure, investment, and economic growth: an analysis in PESCO countries," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 173, Hellenic Observatory, LSE.
    14. MAÏ ASSAN CHEDI, Maman, 2022. "Does Defence Expenditure Affect Education and Health expenditures in Saharan Africa?," African Journal of Economic Review, African Journal of Economic Review, vol. 10(4), September.
    15. Charles Shaaba Saba & Nicholas Ngepah, 2022. "ICT Diffusion, Industrialisation and Economic Growth Nexus: an International Cross-country Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 2030-2069, September.
    16. Mariya A. Shchepeleva, 2020. "Modeling the Balance Sheet Channel of Monetary Transmission in Russia," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 2, pages 39-56, April.
    17. Kumeka, Terver Theophilus & Uzoma-Nwosu, Damian Chidozie & David-Wayas, Maria Onyinye, 2022. "The effects of COVID-19 on the interrelationship among oil prices, stock prices and exchange rates in selected oil exporting economies," Resources Policy, Elsevier, vol. 77(C).
    18. Paul-Olivier Klein & Rima Turk-Ariss, 2022. "Bank capital and economic activity," Post-Print hal-03955630, HAL.
    19. Lepers, Etienne & Sánchez Serrano, Antonio, 2020. "Decomposing financial (in)stability in emerging economies," Research in International Business and Finance, Elsevier, vol. 51(C).
    20. Jiaqi Xiao & Artūras Juodis & Yiannis Karavias & Vasilis Sarafidis & Jan Ditzen, 2023. "Improved tests for Granger noncausality in panel data," Stata Journal, StataCorp LP, vol. 23(1), pages 230-242, March.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:924. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alvaro Castillo (email available below). General contact details of provider: https://edirc.repec.org/data/bccgvcl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.