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Determinants of International Reserves: Empirical Evidence from Emerging Asia

Author

Listed:
  • Chandan Sharma

    () (Indian Institute of Management, Lucknow)

  • Sunny K Singh

    () (Indian Institute of Management, Lucknow)

Abstract

In this study, we attempt to estimate the long term determinants of international reserves in the emerging Asian for the period 1980-2011. In this study, we attempt to estimate the long term determinants of international reserves in the emerging Asia for the period 1980-2011. Utilizing a well-established panel data estimation technique fully modified OLS (FMOLS), we find that trade openness, country size, export volatility and opportunity cost of reserve accumulation are significant factors explaining the determinants of international reserves in the emerging Asia. Under the environment of high dependency on inelastic imports and capital mobility with frequent and costly financial crises, it seems that these countries self-insurance themselves against the possible currency crisis.

Suggested Citation

  • Chandan Sharma & Sunny K Singh, 2014. "Determinants of International Reserves: Empirical Evidence from Emerging Asia," Economics Bulletin, AccessEcon, vol. 34(3), pages 1696-1703.
  • Handle: RePEc:ebl:ecbull:eb-14-00531
    as

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    References listed on IDEAS

    as
    1. Marc-André Gosselin & Nicolas Parent, 2005. "An Empirical Analysis of Foreign Exchange Reserves in Emerging Asia," Staff Working Papers 05-38, Bank of Canada.
    2. Joshua Aizenman & Jaewoo Lee, 2007. "International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence," Open Economies Review, Springer, vol. 18(2), pages 191-214, April.
    3. Mohsen Bahmani-Oskooee & Scott Hegerty, 2011. "How stable is the demand for international reserves?," Applied Economics Letters, Taylor & Francis Journals, vol. 18(14), pages 1387-1392.
    4. Mishra, Ritesh Kumar & Sharma, Chandan, 2011. "India's demand for international reserve and monetary disequilibrium: Reserve adequacy under floating regime," Journal of Policy Modeling, Elsevier, vol. 33(6), pages 901-919.
    5. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    6. 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.
    7. Aizenman, Joshua & Lee, Yeonho & Rhee, Youngseop, 2007. "International reserves management and capital mobility in a volatile world: Policy considerations and a case study of Korea," Journal of the Japanese and International Economies, Elsevier, vol. 21(1), pages 1-15, March.
    8. Edwards, Sebastian, 1985. "On the interest-rate elasticity of the demand for international reserves: Some evidence from developing countries," Journal of International Money and Finance, Elsevier, vol. 4(2), pages 287-295, June.
    9. Angel García Banchs & Luis Mata Mollejas, 2010. "International monetary asymmetries and the central bank," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(3), pages 467-496, April.
    10. M. Bahmani-Oskooee & F. Brown, 2002. "Demand for international reserves: a review article," Applied Economics, Taylor & Francis Journals, vol. 34(10), pages 1209-1226.
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    More about this item

    Keywords

    International reserves; Emerging Asia; Panel Cointegration; FMOLS;

    JEL classification:

    • F3 - International Economics - - International Finance
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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