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Did Foreign Exchange Holding Influence Growth Performance During The Global Financial Crisis?

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  • Jean-Pierre Allegret

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Audrey Allegret-Sallenave

    (LEAD - Laboratoire d'Économie Appliquée au Développement - UTLN - Université de Toulon)

Abstract

In a context of increased foreign exchange reserves holding from emerging and developing countries, this paper investigates the diminishing return of reserves holding assumption over the most severe phase of the global financial crisis (2008Q1-2010Q4). Relying on a Panel Smooth Transition Regression model, we highlight the differential effect of the accumulation of foreign exchange reserves for a set of financial vulnerabilities variables. Specifically, while reserve accumulation is effective above a critical threshold to cope with vulnerabilities related to the financial channel, we show that it becomes less effective beyond a certain threshold for domestic bank vulnerabilities.

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  • Jean-Pierre Allegret & Audrey Allegret-Sallenave, 2019. "Did Foreign Exchange Holding Influence Growth Performance During The Global Financial Crisis?," Post-Print hal-01820698, HAL.
    • Handle: RePEc:hal:journl:hal-01820698
    DOI: 10.1111/twec.12701
    Note: View the original document on HAL open archive server: https://hal.science/hal-01820698
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    Keywords

    Panel Smooth Transition Regression model; reserve accumulation; Financial crisis; Financial vulnerabilities; Reserves accumulation;
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