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Understanding Reserve Volatility in Emerging Markets: A Look at the Long-Run

  • Ricarda Demarmels

    ()

    (University of St. Gallen and Swiss National Bank)

  • Andreas Fischer

    ()

    (Swiss National Bank and CEPR)

In this paper, we examine long-run determinants of cross-country variation in reserve volatility for 30 emerging market economies from 1973 to 2000. Reserve holdings and openess are found to be the most important explanatory variables of reserve volatility. The empirical results are robust for a range of control variables, including monetary variables, the degree of financial development, and the level of indebtedness. We view these results as establishing stylized facts that may be helpful in evaluating reserve volatility as a crisis indicator.

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Paper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 03.03.

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Length: 28 pages
Date of creation: Mar 2003
Date of revision:
Handle: RePEc:szg:worpap:0303
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  1. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  2. Reuven Glick & Michael M. Hutchison, . "Banking and Currency Crises: How Common Are Twins?," EPRU Working Paper Series 99-20, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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  17. Robert P. Flood & Nancy P. Marion, 2002. "Holding International Reserves in an Era of High Capital Mobility," IMF Working Papers 02/62, International Monetary Fund.
  18. Christopher J. Neely, 2000. "Are changes in foreign exchange reserves well correlated with official intervention?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 17-32.
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