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What drove the massive hoarding of international reserves in emerging countries? A time varying approach

Author

Listed:
  • Anne-Laure Delatte

    (Pôle Finance Responsable - Rouen Business School - Rouen Business School)

  • Julien Fouquau

    (Pôle Finance Responsable - Rouen Business School - Rouen Business School)

Abstract

The existing empirical models fail to explain the surge in the foreign exchange reserves accumulation by emerging countries during the last decade. In this paper we estimate the demand for international reserves on a panel of emerging countries with a Time-Varying Panel Smooth Threshold Regression model (TV-PSTR) to relax the assumption of coefficients stability in the relationship. First, we find evidence of non-constancy of the parameters. Second, the coefficients are relatively stable until 2000 and have increased gradually and strongly afterwards. Therefore our specification accounts for the acceleration that the linear specifications fail to explain. Third, we find that the mercantilist motives are the major driver of this acceleration.

Suggested Citation

  • Anne-Laure Delatte & Julien Fouquau, 2011. "What drove the massive hoarding of international reserves in emerging countries? A time varying approach," Post-Print hal-00734893, HAL.
  • Handle: RePEc:hal:journl:hal-00734893
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    Cited by:

    1. Atish R. Ghosh & Jonathan D. Ostry & Charalambos G. Tsangarides, 2017. "Shifting Motives: Explaining the Buildup in Official Reserves in Emerging Markets Since the 1980s," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(2), pages 308-364, June.

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