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Understanding Reserve Volatility in Emerging Markets: A Look at the Long-Run

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  • Demarmels, Ricarda
  • Fischer, Andreas M

Abstract

In this Paper, we examine long-run determinants of cross-country variation in reserve volatility for 30 emerging market economies from 1973-2000. Reserve holdings and openness are found to be the most important explanatory variables of reserve volatility. The empirical results are robust for a range of control variables, including monetary variables, the degree of financial development, and the level of indebtedness. We view these results as establishing interesting stylized facts that may be helpful in evaluating reserve volatility as a crisis indicator.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3908.

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Date of creation: Apr 2003
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Handle: RePEc:cpr:ceprdp:3908

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Keywords: emerging markets; openness; reserve volatility;

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  1. Reuven Glick & Michael Hutchison, 1999. "Banking and currency crises: how common are twins?," Pacific Basin Working Paper Series 99-07, Federal Reserve Bank of San Francisco.
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  19. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Enrique Alberola & Luis Molina & Daniel Navia, 2005. "Say You Fix, Enjoy And Relax The Deleterious Effect Of Peg Announcements On Fiscal Discipline," International Finance 0509001, EconWPA.
  2. Catherine S. F. Ho & M. Ariff, 2008. "The Role of Non-Parity Fundamentals in Exchange Rate Determination: Australia and the Asia Pacific Region," CARF F-Series CARF-F-125, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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