IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Demand for Reserves Under International Capital Mobility

  • Pablo García

In this research, I assess the determinants of foreign exchange reserves under endogenous capital flows. I consider a model where reserves represent collateral to international borrowing, which is endogenously determined by risk averse foreign investors. This is a departure from usual models of reserve accumulation, that focus solely on the portfolio decision of a central bank along the lines of optimal inventory control models or precautionary saving. In contrast to this view, I find that the expected effect on reserves of changes in the international interest rate or the volatility of the terms of trade is ambiguous if actions are simultaneous. However, if foreign investors and the central bank act sequentially, this ambiguity breaks down. Empirical evidence from OECD and non-OECD economies is suggestive: while LIBOR and terms of trade volatility positively affects the demand for reserves in OECD economies, the effects are reversed in non-OECD countries. This indicates that commitment issues are an important factor in the determination of reserves in non-OECD countries.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bcentral.cl/estudios/documentos-trabajo/pdf/dtbc58.pdf
Download Restriction: no

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 58.

as
in new window

Length:
Date of creation: Dec 1999
Date of revision:
Handle: RePEc:chb:bcchwp:58
Contact details of provider: Postal: Casilla No967, Santiago
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:58. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.