The portfolio balance effect and reserve diversification: an empirical analysis
AbstractThe purpose of this study is to examine whether the portfolio balance effect, operating through the outstanding debts of US and euro area, and the signaling effect of sterilized intervention, operating through the relative composition of official reserves of developing and emerging countries, explain the developments of the euro/dollar exchange rate. The empirical analysis reveals that both effects are statistically significant and have the correct signs. The Clark-West testing procedure indicates that the model which relates the exchange rate to official reserves and the interest rate differential outperforms the random walk model in the forecasting accuracy.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 431.
Length: 31 pages
Date of creation: Dec 2010
Date of revision:
Contact details of provider:
Postal: Coomunivcations Unit, B-1049 Bruxelles / Brussels
Fax: +32 2 298.08.23
Web page: http://ec.europa.eu/economy_finance/index_en.htm
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-03-05 (All new papers)
- NEP-CBA-2011-03-05 (Central Banking)
- NEP-EEC-2011-03-05 (European Economics)
- NEP-FOR-2011-03-05 (Forecasting)
- NEP-IFN-2011-03-05 (International Finance)
- NEP-MON-2011-03-05 (Monetary Economics)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ECFIN INFO).
If references are entirely missing, you can add them using this form.