The Optimal Demand For Foreign Exchange Reserves In Pakistan
Using monthly data on foreign exchange reserves from June 1995 through June 2005, we find that in line with other country-specific studies the opportunity cost of holding reserves played a greater role than reserve volatility in determining the level of reserves in Pakistan. Our finding is in contrast with the hypothesis of increased capital mobility that is commonly set forth in explaining the precautionary motive for reserve holdings. As also pointed by Ramachandran (2004), this result could perhaps be attributed to the fact that capital outflow in Pakistan (as also in India) is not as free as capital inflow and a large part of the recent reserve accumulation is due to non-debt reserve inflows.
Volume (Year): 5 (2008)
Issue (Month): 1 ()
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References listed on IDEAS
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- Karim Khan & Eatzaz Ahmed, 2005. "The Demand for International Reserves: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 44(4), pages 939-957.
- Ramachandran, M., 2004. "The optimal level of international reserves: evidence for India," Economics Letters, Elsevier, vol. 83(3), pages 365-370, June.
- Antonio Francisco Silva Jr. & Érica Domingos da Silva, 2004. "Optimal International Reserves Holdings In Emerging Markets Economies: The Brazilian Case," Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] 078, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- Joshua Aizenman & Nancy P. Marion, 2002.
"The high demand for international reserves in the Far East: what's going on?,"
Federal Reserve Bank of San Francisco, issue Sep.
- Aizenman, Joshua & Marion, Nancy, 2003. "The high demand for international reserves in the Far East: What is going on?," Journal of the Japanese and International Economies, Elsevier, vol. 17(3), pages 370-400, September.
- Joshua Aizenman & Nancy Marion, 2002. "The High Demand for International Reserves in the Far East: What's Going On?," NBER Working Papers 9266, National Bureau of Economic Research, Inc.
- Joshua Aizenman & Nancy Marion, 2002. "The high demand for international reserves in the Far East: what's going on?," Pacific Basin Working Paper Series 2002-08, Federal Reserve Bank of San Francisco.
- Kelly, Michael G, 1970. "The Demand for International Reserves," American Economic Review, American Economic Association, vol. 60(4), pages 655-67, September.
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