The Demand for International Reserves and Exchange Rate Adjustments: TheCase of LDCs, 1964-1972
In this paper the relationship between the demand for international reserves and exchange rate adjustments is empirically investigated for agroup of LDC's. It is shown that countries that have maintained a fixed exchange rate for a long period of time have a different demand function than countries that have occasionally used exchange rate adjustments for correcting payments imbalances. The dynamics of the adjustment for both groupsof countries are also analyzed. The results show that while both groups tend to eliminate reserve disequilibria fast, those countries that have maintained a fixed rate tend to do it more slowly than countries that have occasionally devalued their currency. It Is also shown that the year prior to a devaluation, international reserves have been, on average, 30% below their short-run desired level. These results are important since they indicate that not all LDC's should be aggregated for prediction purposes. The results also have implications for the analysis of the adequacy of international reserves in less developed countries.
|Date of creation:||Jan 1983|
|Date of revision:|
|Publication status:||published as Edwards, Sebastian. "The Demand for International Reserves and Exchange Rates Adjustments: The Case of LDC's 1964-1972." Economica, Vol. 50, (August 1983), pp. 269-280.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nerlove, Marc, 1971.
"Further Evidence on the Estimation of Dynamic Economic Relations from a Time Series of Cross Sections,"
Econometric Society, vol. 39(2), pages 359-82, March.
- Marc Nerlove, 1968. "Further Evidence on the Estimation of Dynamic Economic Relations from a Time Series of Cross-Sections," Cowles Foundation Discussion Papers 257, Cowles Foundation for Research in Economics, Yale University.
- Clark, Peter B, 1970. "Optimum International Reserves and the Speed of Adjustment," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 356-76, March-Apr.
- Kelly, Michael G, 1970. "The Demand for International Reserves," American Economic Review, American Economic Association, vol. 60(4), pages 655-67, September.
- Jacob A. Frenkel & Boyan Jovanovic, 1980.
"On Transactions and Precautionary Demand for Money,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 95(1), pages 25-43.
- Jacob A. Frenkel & Boyan Jovanovic, 1978. "On Transactions and Precautionary Demand For Money," NBER Working Papers 0288, National Bureau of Economic Research, Inc.
- Edward L. Whalen, 1966. "A Rationalization of the Precautionary Demand for Cash," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 314-324.
- Olivera, Julio H G, 1969. "A Note on the Optimal Rate of Growth of International Reserves," Journal of Political Economy, University of Chicago Press, vol. 77(2), pages 245-48, March/Apr.
- Edwards, Sebastian, 1980. "A note on the dynamic adjustment of the demand for international reserves by LDC's," Economics Letters, Elsevier, vol. 5(1), pages 71-74.
- John F. O. Bilson & Jacob A. Frenkel, 1979. "Dynamic Adjustment and the Demand for International Reserves," NBER Working Papers 0407, National Bureau of Economic Research, Inc.
- John Makin, 1974. "Exchange rate flexibility and the demand for international reserves," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 110(2), pages 229-243, June.
- Frenkel, Jacob A, 1974. "The Demand for International Reserves by Developed and Less-Developed Countries," Economica, London School of Economics and Political Science, vol. 41(161), pages 14-24, February.
- Andrew D. Crockett, 1978. "Control over International Reserves (Surveillance des rÃ©serves internationales) (El control de las reservas internacionales)," IMF Staff Papers, Palgrave Macmillan, vol. 25(1), pages 1-24, March.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:1063. 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: ()
If references are entirely missing, you can add them using this form.