Advanced Search
MyIDEAS: Login to save this paper or follow this series

Low Interest Rate Policy and the Use of Reserve Requirements in Emerging Markets

Contents:

Author Info

  • Andreas Hoffmann

    ()

  • Axel Loeffer

    ()

Registered author(s):

    Abstract

    The 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.

    Download Info

    If 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.
    File URL: http://www.icer.it/docs/wp2014/ICERwp01-14.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by ICER - International Centre for Economic Research in its series ICER Working Papers with number 01-2014.

    as in new window
    Length: 24 pages
    Date of creation: Feb 2014
    Date of revision:
    Handle: RePEc:icr:wpicer:01-2014

    Contact details of provider:
    Postal: Viale Settimio Severo, 63 - 10133 Torino - Italy
    Phone: +39 011 6604828
    Fax: +39 011 6600082
    Email:
    Web page: http://www.icer.it
    More information through EDIRC

    Related research

    Keywords: Reserve Requirements; Interest Rates; Emerging Markets;

    Other versions of this item:

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Kristin J. Forbes & Francis E. Warnock, 2012. "Debt- and Equity-Led Capital Flow Episodes," NBER Working Papers 18329, National Bureau of Economic Research, Inc.
    2. Glocker, C. & Towbin, P., 2012. "Reserve Requirements for Price and Financial Stability - When Are They Effective?," Working papers 363, Banque de France.
    3. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
    4. Alejandro Jara & Ramon Moreno & Camilo E Tovar, 2009. "The global crisis and Latin America: financial impact and policy responses," BIS Quarterly Review, Bank for International Settlements, June.
    5. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
    6. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
    7. Reinhart, Carmen & Reinhart, Vincent, 1999. "On the use of reserve requirements in dealing with capital flow problems," MPRA Paper 13703, University Library of Munich, Germany.
    8. Michael W. Klein, 2012. "Capital Controls: Gates versus Walls," NBER Working Papers 18526, National Bureau of Economic Research, Inc.
    9. von Hagen, Jurgen, 1999. "Money growth targeting by the Bundesbank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 681-701, June.
    10. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    11. Anton Korinek, 2011. "The New Economics of Prudential Capital Controls: A Research Agenda," IMF Economic Review, Palgrave Macmillan, vol. 59(3), pages 523-561, August.
    12. Richard Portes, 2012. "Monetary Policies and Exchange Rates at the Zero Lower Bound," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 157-163, 02.
    13. Edwards, Sebastian & Rigobon, Roberto, 2009. "Capital controls on inflows, exchange rate volatility and external vulnerability," Journal of International Economics, Elsevier, vol. 78(2), pages 256-267, July.
    14. Sebastian Edwards, 2012. "The Federal Reserve, Emerging Markets, and Capital Controls: A High Frequency Empirical Investigation," NBER Working Papers 18557, National Bureau of Economic Research, Inc.
    15. Richard Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    16. Sophie Brana & Marie-Louise Djibenou & Stéphanie Prat, 2012. "Global excess liquidity and asset prices in emerging countries: a pvar approach," Working Papers hal-00740102, HAL.
    17. Ronald I., McKinnon, 2011. "Beggar-thy-neighbor interest rate policies," Journal of Policy Modeling, Elsevier, vol. 33(5), pages 759-775, September.
    18. McKinnon, Ronald I., 2004. "The East Asian dollar standard," China Economic Review, Elsevier, vol. 15(3), pages 325-330.
    19. Benn Steil, 2007. "Monetary Sovereignty as Globalization's Achilles' Heel," Cato Journal, Cato Journal, Cato Institute, vol. 27(2), Spring/Su.
    20. Ostry, Jonathan D. & Ghosh, Atish R. & Chamon, Marcos & Qureshi, Mahvash S., 2012. "Tools for managing financial-stability risks from capital inflows," Journal of International Economics, Elsevier, vol. 88(2), pages 407-421.
    21. Reinhart, Carmen & Kirkegaard, Jacob & Sbrancia, Belen, 2011. "Financial repression redux," MPRA Paper 31641, University Library of Munich, Germany.
    22. Michael W. Klein, 2012. "Capital Controls: Gates versus Walls," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 45(2 (Fall)), pages 317-367.
    23. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:icr:wpicer:01-2014. See general 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: (Alessandra Calosso).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.