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The Empirics of Foreign Reserves

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  • Philip Lane
  • Dominic Burke

Abstract

In this paper, we study the determinants of cross-country variation in the level of international reserves over 1981-95. Confirming intuition, trade openness is easily the most important variable. There is also some evidence that financial deepening is associated with an increase in the reserves ratio. Smaller and more volatile industrial countries hold larger reserves than their larger, less volatile counterparts. In addition, more indebted developing countries tend to have smaller reserve ratios. We view these results as establishing some interesting stylized facts that may be helpful in informing future theoretical modelling of reserves behavior.

Suggested Citation

  • Philip Lane & Dominic Burke, 2001. "The Empirics of Foreign Reserves," Trinity Economics Papers 20015, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:20015
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    References listed on IDEAS

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    1. Grubel, Herbert G, 1971. "The Demand for International Reserves: A Critical Review of the Literature," Journal of Economic Literature, American Economic Association, vol. 9(4), pages 1148-1166, December.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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