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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. 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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  16. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
  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.
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  19. Frenkel, Jacob A & Jovanovic, Boyan, 1981. "Optimal International Reserves: A Stochastic Framework," Economic Journal, Royal Economic Society, vol. 91(362), pages 507-14, June.
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