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International liquidity swaps: is the Chiang Mai Initiative pooling reserves efficiently?

  • E. Kohlscheen

    (Department of Economics, University of Warwick, UK)

  • M. P. Taylor

    (Department of Economics, University of Warwick, UK)

We analyse 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 approximately $ 60 bn of BSAs have had a limited impact, if any, on government bond spreads so far. Finally, we identify potential gains from inter-regional BSAs. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/ijfe.381
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Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 13 (2008)
Issue (Month): 4 ()
Pages: 323-332

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Handle: RePEc:ijf:ijfiec:v:13:y:2008:i:4:p:323-332
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  1. 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 349, Bank of England.
  2. Bayoumi, Tamim & Eichengreen, Barry & Mauro, Paolo, 2000. "On Regional Monetary Arrangements For ASEAN," CEPR Discussion Papers 2411, C.E.P.R. Discussion Papers.
  3. Andrew K. Rose, 2002. "One Reason Countries Pay Their Debts: Renegotiation and International Trade," Working Papers 042002, Hong Kong Institute for Monetary Research.
  4. Srivastava, V. K. & Dwivedi, T. D., 1979. "Estimation of seemingly unrelated regression equations : A brief survey," Journal of Econometrics, Elsevier, vol. 10(1), pages 15-32, April.
  5. Dodsworth, John R, 1978. "International Reserve Economies in Less Developed Countries," Oxford Economic Papers, Oxford University Press, vol. 30(2), pages 277-91, July.
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