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Macroeconomic Impact of International Reserves: Empirical Evidence from South Asia

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  • Prakash Kumar Shrestha, Ph.D.

    () (Nepal Rastra Bank)

Abstract

In recent years, many emerging countries have been accumulating substantial amount of international reserves by outpacing traditional benchmark in response to a series of financial crises in the world. In this context, this paper constructs a dynamic macro model with new monetary policy rule to examine the implications of international reserve accumulation for macroeconomic outcomes such as economic growth and inflation. Such a macro model is empirically examined in the data of South Asian countries, namely Bangladesh, India, Nepal, Pakistan and Sri Lanka by using Panel VAR method for the period of 1990-2013. The empirical results show that increase in international reserves tends to cause higher economic growth in these countries but without significant impact on inflation. This implies that these countries can move further utilizing the accumulated international reserves productively which will enhance economic growth and maintain internal and external balances.

Suggested Citation

  • Prakash Kumar Shrestha, Ph.D., 2016. "Macroeconomic Impact of International Reserves: Empirical Evidence from South Asia," NRB Working Paper 32/2016, Nepal Rastra Bank, Research Department.
  • Handle: RePEc:nrb:wpaper:nrbwp201532
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    References listed on IDEAS

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    Cited by:

    1. Prakash Kumar Shrestha, Ph.D., 2016. "Macroeconomic Impact of International Reserves: Empirical Evidence from South Asia," NRB Working Paper 32/2016, Nepal Rastra Bank, Research Department.

    More about this item

    Keywords

    International Reserves; Macroeconomic impact; South Asia;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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