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Foreign Exchange Reserve Demand : An Information Value Approach

Author

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  • Kurmas Akdogan

Abstract

We perform a statistical analysis to examine the international reserve accumulation of four selected emerging market countries : Argentina, Brazil, Korea and Turkey. We perform Granger causality tests to investigate the information value of key macroeconomic variables on foreign exchange reserves. We use a simple unrestricted vector autoregression analysis to capture a reduced form analysis of the demand for international reserves. Our results suggest that interest rate differentials with the US contain potentially useful information for foreign exchange reserve accumulation for Argentina and Turkey. Similarly, consumption differential with the US and net exports contain information for foreign exchange reserve movements in Korea.

Suggested Citation

  • Kurmas Akdogan, 2010. "Foreign Exchange Reserve Demand : An Information Value Approach," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 10(2), pages 33-44.
    • Handle: RePEc:tcb:cebare:v:10:y:2010:i:2:p:33-44
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    References listed on IDEAS

    as
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    3. Levy Yeyati, Eduardo, 2008. "The cost of reserves," Economics Letters, Elsevier, vol. 100(1), pages 39-42, July.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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