IDEAS home Printed from
   My bibliography  Save this paper

Out-of-Sample Analysis of International Reserves for Emerging Economies with a Dynamic Panel Model


  • Kuk Mo Jung

    () (Department of Economics, Sogang University, Seoul)

  • Ju Hyun Pyun

    () (Korea University Business School,)


Using data on 70 emerging countries for 1990-2011, we re-examine the validity of both traditional and recently proposed determinants of international reserves. The dynamic panel model considers panel unit root, endogeneity, and country heterogeneity and reveals that not only traditional determinants but also new financial variables—M2/GDP and foreign capital inflows through over-the-counter markets— have significant effects on reserves hoarding. More importantly, out-of-sample forecasts show that the dynamic model yields the best goodness-of-fit, and its predicted values successfully account for the recent patterns in reserve accumulations.

Suggested Citation

  • Kuk Mo Jung & Ju Hyun Pyun, 2019. "Out-of-Sample Analysis of International Reserves for Emerging Economies with a Dynamic Panel Model," Working Papers 1904, Research Institute for Market Economy, Sogang University.
  • Handle: RePEc:sgo:wpaper:1904

    Download full text from publisher

    File URL:
    File Function: First version, 2019
    Download Restriction: no

    References listed on IDEAS

    1. Pina, Gonçalo, 2015. "The recent growth of international reserves in developing economies: A monetary perspective," Journal of International Money and Finance, Elsevier, vol. 58(C), pages 172-190.
    2. Olivier Jeanne & Romain Rancière, 2011. "The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications," Economic Journal, Royal Economic Society, vol. 121(555), pages 905-930, September.
    3. Andreas Steiner, 2011. "Do dynamics and heterogeneity in panel data models matter?," Empirical Economics, Springer, vol. 40(1), pages 165-176, February.
    4. Lee, Sang Seok & Luk, Paul, 2018. "The Asian Financial Crisis and international reserve accumulation: A robust control approach," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 284-309.
    Full references (including those not matched with items on IDEAS)

    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. Guangyou Zhou & Xiaoxuan Yan & Sumei Luo, 2018. "Financial Security and Optimal Scale of Foreign Exchange Reserve in China," Sustainability, MDPI, Open Access Journal, vol. 10(6), pages 1-19, May.
    2. Pina, Gonçalo, 2017. "International reserves and global interest rates," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 371-385.
    3. Luis Cabezas & José De Gregorio, 2018. "Accumulation of Reserves in Emerging and Developing Countries: Mercantilism vs. Insurance," Working Papers wp467, University of Chile, Department of Economics.
    4. Jung, Kuk Mo & Pyun, Ju Hyun, 2016. "International reserves for emerging economies: A liquidity approach," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 230-257.
    5. Luis Cabezas & José Gregorio, 2019. "Accumulation of reserves in emerging and developing countries: mercantilism versus insurance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(4), pages 819-857, November.
    6. Steiner, Andreas, 2013. "The accumulation of foreign exchange by central banks: Fear of capital mobility?," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 409-427.
    7. Dongwon Lee & Yu-chin Chen, 2014. "What Makes a Commodity Currency?," Working Papers 201420, University of California at Riverside, Department of Economics.
    8. Felipe Benguria & Felipe Saffie & Hidehiko Matsumoto, 2019. "Productivity and Trade Dynamics in Sudden Stops," 2019 Meeting Papers 1378, Society for Economic Dynamics.
    9. Régis Barnichon & Geert Mesters, 2020. "Optimal policy perturbations," Economics Working Papers 1716, Department of Economics and Business, Universitat Pompeu Fabra.
    10. Fornaro, Luca, 2015. "Financial crises and exchange rate policy," Journal of International Economics, Elsevier, vol. 95(2), pages 202-215.
    11. Christopher D. Carroll & Olivier Jeanne, 2009. "A Tractable Model of Precautionary Reserves, Net Foreign Assets, or Sovereign Wealth Funds," Working Paper Series WP09-10, Peterson Institute for International Economics.
    12. John FitzGerald & Philip Lane, 2016. "Fiscal Policy and Financial Distress: A Balance Sheet Perspective," Trinity Economics Papers tep0216, Trinity College Dublin, Department of Economics.
    13. Alexander Semin & Marina Vasiljeva & Alexander Sokolov & Nikolay Kuznetsov & Maksim Maramygin & Maria Volkova & Angelina Zekiy & Izabella Elyakova & Natalya Nikitina, 2020. "Improving Early Warning System Indicators for Crisis Manifestations in the Russian Economy," Journal of Open Innovation: Technology, Market, and Complexity, MDPI, Open Access Journal, vol. 6(4), pages 1-21, November.
    14. Benecká, Soňa & Komarek, Lubos, 2018. "International reserves: Facing model uncertainty," Economic Systems, Elsevier, vol. 42(3), pages 523-531.
    15. Urrutia, Miguel & Hofstetter, Marc & Hamann, Franz, 2014. "Inflation Targeting in Colombia, 2002-2012," IDB Publications (Working Papers) 6394, Inter-American Development Bank.
    16. Javier Bianchi & Cesar Sosa-Padilla, 2018. "Reserve Accumulation, Macroeconomic Stabilization and Sovereign Risk," 2018 Meeting Papers 1166, Society for Economic Dynamics.
    17. Eduardo Levy Yeyati & Juan Francisco Gómez, 2019. "The cost of holding foreign exchange reserves," School of Government Working Papers 201901, Universidad Torcuato Di Tella.
    18. Ricardo Sabbadini, 2018. "International Reserves Management in a Model of Partial Sovereign Default," Working Papers, Department of Economics 2018_14, University of São Paulo (FEA-USP).
    19. Arazmuradov, Annageldy, 2016. "Assessing sovereign debt default by efficiency," The Journal of Economic Asymmetries, Elsevier, vol. 13(C), pages 100-113.
    20. Ahmed, Rashad, 2020. "Global Flight-to-Safety Shocks," MPRA Paper 103501, University Library of Munich, Germany.

    More about this item


    foreign exchange reserves; dynamic panel estimation; out-of-sample analysis; emerging economies; over-the-counter markets;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:sgo:wpaper:1904. 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: (Jung Hur). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.