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Hoarding of International Reserves: A Comparison of the Asian and Latin American Experiences

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Author Info
Yin-wong Cheung (University of California, Santa Cruz, USA, Hong Kong Institute for Monetary Research)
Hiro Ito (Portland State University, Portland, USA)

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Abstract

We examine the empirical determinants of the demand for international reserves and compare the experiences of some Asian and Latin American economies. Our empirical results indicate that different vintages of the model of international reserves give different inferences about the appropriate level of international reserves. The developed and developing economies have equations of the demand for international reserves that are quite different from each other. Further, the Asian economies and the Latin American economies have different empirical determinants of the demand for international reserves. Our results highlight the complexity of evaluating whether an economy is holding an excessive or deficient level of international reserves ¨C the inference can be heavily dependent on the choice of a benchmark model. A direct comparison affirms the perception that the Asian economies tend to hold more international reserves than the Latin American economies.

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Publisher Info
Paper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 072008.

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Length: 35 pages
Date of creation: Jul 2008
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Handle: RePEc:hkm:wpaper:072008

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Related research
Keywords: Foreign Exchange Reserves Macro Determinants Financial Factors Institutional Variables Excessive Hoarding of International Reserves

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Find related papers by JEL classification:
F31 - International Economics - - International Finance - - - Foreign Exchange
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
F34 - International Economics - - International Finance - - - International Lending and Debt Problems
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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  8. Michael P. Dooley, 1997. "A Model of Crises in Emerging Markets," NBER Working Papers 6300, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Frenkel, Jacob A & Jovanovic, Boyan, 1981. "Optimal International Reserves: A Stochastic Framework," Economic Journal, Royal Economic Society, vol. 91(362), pages 507-14, June. [Downloadable!] (restricted)
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  14. Kelly, Michael G, 1970. "The Demand for International Reserves," American Economic Review, American Economic Association, vol. 60(4), pages 655-67, September. [Downloadable!] (restricted)
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