Low Interest Rate Policy and the Use of Reserve Requirements in Emerging Markets
AbstractThe paper sheds light on the link between the interest rate policy in large advanced economies with international funding and reserve currencies (the United States and the Euro Area) and the use of reserve requirements in emerging markets. Using reserve requirement data for 28 emerging markets from 1998 to 2012 we provide evidence that emerging market central banks tend to raise reserve requirements when interest rates in international funding markets decline or financial infl ows accelerate to preserve fnancial stability. In contrast, when global liquidity risk rises and funding from the large advanced economies dries up emerging markets lower reserve requirements to stabilize the banking system that is in need of liquidity.
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Bibliographic InfoPaper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 01-2014.
Length: 24 pages
Date of creation: Feb 2014
Date of revision:
Reserve Requirements; Interest Rates; Emerging Markets;
Other versions of this item:
- Hoffmann, Andreas & Loeffler, Axel, 2013. "Low interest rate policy and the use of reserve requirements in emerging markets," Working Papers 120, University of Leipzig, Faculty of Economics and Management Science.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-21 (All new papers)
- NEP-CBA-2014-02-21 (Central Banking)
- NEP-MAC-2014-02-21 (Macroeconomics)
- NEP-MON-2014-02-21 (Monetary Economics)
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