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Asian Holdings of US Treasury Securities: Trade Integration as a Threshold

Author

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  • Akiko Terada-Hagiwara

    (Asian Development Bank)

Abstract

This paper empirically investigates if there have been any shift in regime with Asian holdings of long-term United States (US) Treasury securities, with particular attention paid to the role of growing regional integration in trade. A panel regression estimation of eight Asian countries for 1998–2004 confirms the striking persistency of the portfolio weight of US Treasury securities. It also reveals, without surprise, that the traditionally strong trade link with the US, as well as the exchange rate regime, explain the observed upward deviation of US Treasury securities from what is warranted by its market share. What is interesting, however, is that the estimated regime switches, as found when examined with a threshold estimation. The paper finds three thresholds that divide the sample into four regimes—a decreasing persistency as the intraregional trade link becomes tighter.

Suggested Citation

  • Akiko Terada-Hagiwara, 2008. "Asian Holdings of US Treasury Securities: Trade Integration as a Threshold," ADB Economics Working Paper Series 137, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0137
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    References listed on IDEAS

    as
    1. Goldberg, Linda S. & Tille, Cédric, 2008. "Vehicle currency use in international trade," Journal of International Economics, Elsevier, vol. 76(2), pages 177-192, December.
    2. Eichengreen, Barry & Mathieson, Donald J., "undated". "The Currency Composition of Foreign Exchange Reserves Retrospect and Prospect," WIDER Working Papers 295509, United Nations University, World Institute for Development Economic Research (UNU-WIDER).
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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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