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Foreign Reserves and Economic Growth: Granger Causality Analysis with Panel Data

  • Mei-yin Lin

    ()

    (Department of Economics, Shih Hsin University)

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    This paper will investigate the Granger causality between foreign reserves and economic growth in twenty largest reserves-holding countries ranging from 1980 to 2008. The method of first-differencing each variable is used to estimate the panel data VAR equations for Granger causality test. The results show the foreign reserves unilaterally Granger cause economic growth only in the emerging countries. In the advanced countries, there is no Granger causal relation between foreign reserves and economic growth.

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I2-P145.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 31 (2011)
    Issue (Month): 2 ()
    Pages: 1563-1575

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    Handle: RePEc:ebl:ecbull:eb-11-00058
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    1. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    2. Moritz Cruz & Bernard Walters, 2008. "Is the accumulation of international reserves good for development?," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 665-681, September.
    3. Polterovich, Victor & Popov, Vladimir, 2003. "Accumulation of Foreign Exchange Reserves and Long Term Growth," MPRA Paper 20069, University Library of Munich, Germany.
    4. Sebastian Edwards, 1981. "The Demand for International Reserves and Exchange Rate Adjustments: The Case of LDC's, 1964-1972," UCLA Economics Working Papers 229, UCLA Department of Economics.
    5. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    6. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
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