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International Liquidity Swaps : Is the Chiang Mai Initiative Pooling Reserves Efficiently ?

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  • Kohlscheen, Emanuel

    (Department of Economics, University of Warwick)

  • Taylor, Mark P

    (Department of Economics, University of Warwick)

Abstract

We analyze the network of bilateral liquidity swaps (BSAs) among the ASEAN+3 countries. We find that the network has taken the correlation of capital flows in the region into account, in the sense that countries with lower correlation of reserve growth have engaged in larger BSAs. All else equal, a decimal point increase in the correlation of international reserve growth decreases the size of a bilateral swap agreement between 18 and 27%. Moreover, we find that the approximatedly $ 60bn of BSAs have had a limited impact, if any, on government bond spreads so far. Finally, we identify potential gains from inter-regional BSAs.

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Bibliographic Info

Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 752.

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Length: 25 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:752

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Keywords: insurance ; international reserves ; liquidity ; sovereign risk ; swaps;

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References

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  1. Andrew K. Rose, 2002. "One Reason Countries Pay Their Debts: Renegotiation and International Trade," Working Papers, Hong Kong Institute for Monetary Research 042002, Hong Kong Institute for Monetary Research.
  2. Irwin, Gregor & Penalver, Adrian & Salmon, Chris & Taylor, Ashley, 2008. "Dealing with country diversity: challenges for the IMF credit union model," Bank of England working papers, Bank of England 349, Bank of England.
  3. Bayoumi, Tamim & Eichengreen, Barry & Mauro, Paolo, 2000. "On Regional Monetary Arrangements for ASEAN," Journal of the Japanese and International Economies, Elsevier, vol. 14(2), pages 121-148, June.
  4. Dodsworth, John R, 1978. "International Reserve Economies in Less Developed Countries," Oxford Economic Papers, Oxford University Press, vol. 30(2), pages 277-91, July.
  5. Srivastava, V. K. & Dwivedi, T. D., 1979. "Estimation of seemingly unrelated regression equations : A brief survey," Journal of Econometrics, Elsevier, Elsevier, vol. 10(1), pages 15-32, April.
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Cited by:
  1. Marcus Miller & Lei Zhang, 2007. "Temor y falla de mercados: Desequilibrios mundiales y “aseguramiento propio," Research Department Publications, Inter-American Development Bank, Research Department 4499, Inter-American Development Bank, Research Department.
  2. Dent, Christopher M., 2010. "Organizing the Wider East Asia Region," Working Papers on Regional Economic Integration, Asian Development Bank 62, Asian Development Bank.
  3. Marcus Miller & Lei Zhang, 2006. "Capital Flows, Interest Rates and Precautionary Behaviour: a model of "global imbalances"," WEF Working Papers, ESRC World Economy and Finance Research Programme, Birkbeck, University of London 0014, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  4. Miller, Marcus & Zhang, Lei, 2006. "Fear and Market Failure: Global Imbalances and 'Self-insurance'," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6000, C.E.P.R. Discussion Papers.

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