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Financial Market Volatility and International Reserve Holding Behaviour: A Case Study for Korea, Indonesia, the Philippines, and Thailand

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  • Hee-Ryang Ra

Abstract

The effects of financial market volatility on the international reserve holding behaviour of four Asian countries that experienced the financial crisis in 1997—Korea, Indonesia, the Philippines, and Thailand are investigated. The financial market volatility is modelled and the effect on reserve dynamics, reserve accumulation, and reserve volatility is estimated. Estimations are taken for two periods—pre- and post-crisis—and the structural break test is performed to examine the change in the effects on reserve holding behaviour. The empirical results, in general, support the evidence for the structural change in the effects on reserve holding behaviour after the crisis. This would be one of the evidences of the precautionary motive for reserve holdings after the crisis.

Suggested Citation

  • Hee-Ryang Ra, 2008. "Financial Market Volatility and International Reserve Holding Behaviour: A Case Study for Korea, Indonesia, the Philippines, and Thailand," Global Economic Review, Taylor & Francis Journals, vol. 37(3), pages 311-332.
  • Handle: RePEc:taf:glecrv:v:37:y:2008:i:3:p:311-332
    DOI: 10.1080/12265080802273299
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    References listed on IDEAS

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    4. Reinhart, Carmen & Goldstein, Morris & Kaminsky, Graciela, 2000. "Assessing financial vulnerability, an early warning system for emerging markets: Introduction," MPRA Paper 13629, University Library of Munich, Germany.
    5. Guillermo A. Calvo, 1995. "Varieties of Capital-Market Crises," Research Department Publications 4008, Inter-American Development Bank, Research Department.
    6. Ferhan Salman & Aslihan Salih, 1999. "Modeling the Volatility In the Central Bank Reserves In An Emerging Market Setting," Working Papers 9901, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    7. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
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