IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/halshs-00695611.html
   My bibliography  Save this paper

Hoarding of International Reserves and Sterilization in Dollarized and Indebted Countries : an effective monetary policy?

Author

Listed:
  • Layal Mansour

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

The primary aim of this paper is to explore the effectiveness of Hoarding International Reserves and Sterilization in dollarized and indebted countries such as Turkey and Lebanon, by measuring the sterilization coefficient, and the offset coefficient. It also focuses on exploring the link between the sources of Reserves and the external debt. Using monthly data collected from the International Monetary Fund and from the Central Banks of Turkey and Lebanon between January 1994 and February 2011, we applied a 2SLS regression models and we identified explanatory variables that enabled us to estimate the aforementioned coefficients. Our results showed that despite their theoretical practice of sterilization policy, economic constrains of these countries contribute to weaken the efficacy expected from monetary policies.

Suggested Citation

  • Layal Mansour, 2012. "Hoarding of International Reserves and Sterilization in Dollarized and Indebted Countries : an effective monetary policy?," Working Papers halshs-00695611, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00695611
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00695611v1
    as

    Download full text from publisher

    File URL: https://shs.hal.science/halshs-00695611v1/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew D. Crockett, 1999. "General discussion : exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 411-422.
    2. Joshua Aizenman & Jaewoo Lee, 2008. "Financial versus Monetary Mercantilism: Long‐run View of Large International Reserves Hoarding," The World Economy, Wiley Blackwell, vol. 31(5), pages 593-611, May.
    3. Reinhart, Carmen & Calvo, Guillermo, 1999. "Capital Flow Reversals,the Exchange Rate Debate,and Dollarization," MPRA Paper 8951, University Library of Munich, Germany.
    4. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    5. Edgar L Feige, 2003. "Dynamics of Currency Substitution, Asset Substitution and De facto Dollarisation and Euroisation in Transition Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 45(3), pages 358-383, September.
    6. Aizenman, Joshua & Marion, Nancy P., 2003. "International Reserve Holdings with Sovereign Risk and Costly Tax Collection," Santa Cruz Department of Economics, Working Paper Series qt9s7978n1, Department of Economics, UC Santa Cruz.
    7. Jean-Baptiste Desquilbet, 2007. "Les contraintes de la politique monétaire libanaise (1993-2004) : endettement public, dollarisation et taux de change fixe," L'Actualité Economique, Société Canadienne de Science Economique, vol. 83(2), pages 163-199.
    8. Joshua Aizenman & Nancy Marion, 2004. "International Reserve Holdings with Sovereign Risk and Costly Tax Collection," Economic Journal, Royal Economic Society, vol. 114(497), pages 569-591, July.
    9. Tony Cavoli & Ramkishen S. Rajan, 2006. "Capital Inflows Problem in Selected Asian Economies in the 1990s Revisited: The Role of Monetary Sterilization," Asian Economic Journal, East Asian Economic Association, vol. 20(4), pages 409-423, December.
    10. Celasun, Oya & Denizer, Cevdet & Dong He, 1999. "Capital flows, macroeconomic management, and the financial system - Turkey, 1989-97," Policy Research Working Paper Series 2141, The World Bank.
    11. Guillermo A. Calvo, 2006. "Monetary Policy Challenges in Emerging Markets: Sudden Stop, Liability Dollarization, and Lender of Last Resort," Research Department Publications 4504, Inter-American Development Bank, Research Department.
    12. Aizenman, Joshua & Jinjarak, Yothin & Park, Donghyun, 2011. "International reserves and swap lines: Substitutes or complements?," International Review of Economics & Finance, Elsevier, vol. 20(1), pages 5-18, January.
    13. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    14. Aizenman, Joshua & Marion, Nancy P., 2003. "International Reserve Holdings with Sovereign Risk and Costly Tax Collection," Santa Cruz Center for International Economics, Working Paper Series qt9s7978n1, Center for International Economics, UC Santa Cruz.
    15. Tony Cavoli & Ramkishen S. Rajan, 2006. "Capital Inflows Problem in Selected Asian Economies in the 1990s Revisited: The Role of Monetary Sterilization," Asian Economic Journal, East Asian Economic Association, vol. 20(4), pages 409-423, December.
    16. Joshua Aizenman, 2009. "Financial Crisis and the Paradox of Under- and Over-Regulation," NBER Working Papers 15018, National Bureau of Economic Research, Inc.
    17. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
    18. Mr. Jakob E Christensen, 2004. "Capital Inflows, Sterilization, and Commercial Bank Speculation: The Case of the Czech Republic in the Mid-1990's," IMF Working Papers 2004/218, International Monetary Fund.
    19. Ricardo J. Caballero & Arvind Krishnamurthy, 2001. "International Liquidity Illusion: On the Risks of Sterilization," NBER Working Papers 8141, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aissa DJEDAIET & Hicham AYAD, 2017. "Hard currency inflows and sterilization policy in Algeria: An ARDL approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(612), A), pages 83-96, Autumn.
    2. Djedaiet Aissa & Ayad Hicham, 2022. "Hard currency inflows and sterilization policy in Algeria," SN Business & Economics, Springer, vol. 2(9), pages 1-16, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Joshua Aizenman & Reuven Glick, 2009. "Sterilization, Monetary Policy, and Global Financial Integration," Review of International Economics, Wiley Blackwell, vol. 17(4), pages 777-801, September.
    2. Sebastian Edwards, 2011. "Exchange-Rate Policies in Emerging Countries: Eleven Empirical Regularities From Latin America and East Asia," Open Economies Review, Springer, vol. 22(4), pages 533-563, September.
    3. Laura Alfaro & Fabio Kanczuk, 2019. "Debt Redemption and Reserve Accumulation," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(2), pages 261-287, June.
    4. Dongwon Lee, 2023. "International cooperation in foreign reserve policies in the presence of competitive hoarding," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 389-412, May.
    5. Betts, Caroline & Devereux, Michael B, 2000. "International Monetary Policy Coordination and Competitive Depreciation: A Reevaluation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(4), pages 722-745, November.
    6. Sebastian Edwards, 2011. "Exchange Rates in Emerging Countries: Eleven Empirical Regularities from Latin America and East Asia," NBER Working Papers 17074, National Bureau of Economic Research, Inc.
    7. Joshua Aizenman, 2011. "Trilemma and Financial Stability Configurations in Asia," Macroeconomics Working Papers 23219, East Asian Bureau of Economic Research.
    8. Heng, Dyna, 2011. "Does financial development reduce the motivation to hoard foreign reserves?," MPRA Paper 48555, University Library of Munich, Germany, revised 2012.
    9. Aizenman, Joshua & Cheung, Yin-Wong & Ito, Hiro, 2015. "International reserves before and after the global crisis: Is there no end to hoarding?," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 102-126.
    10. Giulio Cifarelli & Giovanna Paladino, 2008. "Reserve overstocking in a highly integrated world. New evidence from Asia and Latin America," The European Journal of Finance, Taylor & Francis Journals, vol. 14(4), pages 315-336.
    11. Eduardo J. J. Ganapolsky, 2004. "Optimal Fear of Floating: The Role of Currency Mismatches and Fiscal Constraints," Econometric Society 2004 Latin American Meetings 85, Econometric Society.
    12. Eduardo J. J. Ganapolsky, 2003. "Optimal fear of floating: the role of currency mismatches and fiscal constraints," FRB Atlanta Working Paper 2003-31, Federal Reserve Bank of Atlanta.
    13. Diego Bastourre & Jorge Carrera & Javier Ibarlucia, 2009. "What is Driving Reserve Accumulation? A Dynamic Panel Data Approach," Review of International Economics, Wiley Blackwell, vol. 17(4), pages 861-877, September.
    14. Alfaro, Laura & Kanczuk, Fabio, 2009. "Optimal reserve management and sovereign debt," Journal of International Economics, Elsevier, vol. 77(1), pages 23-36, February.
    15. Mr. Wendell A. Samuel & Emilio Pineda & Mr. Mario Dehesa, 2009. "Optimal Reserves in the Eastern Caribbean Currency Union," IMF Working Papers 2009/077, International Monetary Fund.
    16. Aizenman, Joshua & Pinto, Brian, 2011. "Managing Financial Integration and Capital Mobility— Policy lessons from the past two decades," Santa Cruz Department of Economics, Working Paper Series qt9j53m1tp, Department of Economics, UC Santa Cruz.
    17. Miss Nkunde Mwase, 2012. "How much should I hold? Reserve Adequacy in Emerging Markets and Small Islands," IMF Working Papers 2012/205, International Monetary Fund.
    18. Yu Hsing, 2012. "Impacts of the Trilemma Policies on Inflation, Growth and Volatility in Greece," International Journal of Economics and Financial Issues, Econjournals, vol. 2(3), pages 373-378.
    19. Levy Yeyati, Eduardo & Sturzenegger, Federico, 2010. "Monetary and Exchange Rate Policies," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4215-4281, Elsevier.
    20. Joshua Aizenman, 2008. "Large Hoarding Of International Reserves And The Emerging Global Economic Architecture," Manchester School, University of Manchester, vol. 76(5), pages 487-503, September.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F30 - International Economics - - International Finance - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00695611. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.