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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. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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  3. Carmen M. Reinhart, 2002. "Default, Currency Crises and Sovereign Credit Ratings," NBER Working Papers 8738, National Bureau of Economic Research, Inc.
  4. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," NBER Working Papers 6312, National Bureau of Economic Research, Inc.
  5. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "Paper Tigers? A Model of the Asian Crisis," NBER Working Papers 6783, National Bureau of Economic Research, Inc.
  6. Martin Feldstein, 2002. "Economic and Financial Crises in Emerging Market Economies: Overview of Prevention and Management," NBER Working Papers 8837, National Bureau of Economic Research, Inc.
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  8. 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.
  9. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
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  11. Ilan Goldfajn & Rodrigo O. Valdés, 1997. "Capital Flows and the Twin Crises: The Role of Liquidity," IMF Working Papers 97/87, International Monetary Fund.
  12. Reinhart, Carmen, 2000. "The mirage of floating exchange rates," MPRA Paper 13736, University Library of Munich, Germany.
  13. Carlo Cottarelli & Curzio Giannini, 1997. "Credibility Without Rules," IMF Occasional Papers 154, International Monetary Fund.
  14. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
  15. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  16. Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, vol. 90(2), pages 65-70, May.
  17. Jean-François Perrault, 2002. "Private Capital Flows to Emerging-Market Economies," Bank of Canada Review, Bank of Canada, vol. 2002(Spring), pages 33-43.
  18. Philip Lane & Dominic Burke, 2001. "The Empirics of Foreign Reserves," CEG Working Papers 20013, Trinity College Dublin, Department of Economics.
  19. 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.
  20. Frenkel, Jacob A & Jovanovic, Boyan, 1981. "Optimal International Reserves: A Stochastic Framework," Economic Journal, Royal Economic Society, vol. 91(362), pages 507-14, June.
  21. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
  22. Joshua Aizenman & Nancy Marion, 1999. "Reserve Uncertainty and the Supply of International Credit," NBER Working Papers 7202, National Bureau of Economic Research, Inc.
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