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International Liquidity Swaps : Is the Chiang Mai Initiative Pooling Reserves Efficiently ?

  • Kohlscheen, Emanuel

    (Department of Economics, University of Warwick)

  • Taylor, Mark P

    (Department of Economics, University of Warwick)

We analyze the network of bilateral liquidity swaps (BSAs) among the ASEAN+3 countries. We find that the network has taken the correlation of capital flows in the region into account, in the sense that countries with lower correlation of reserve growth have engaged in larger BSAs. All else equal, a decimal point increase in the correlation of international reserve growth decreases the size of a bilateral swap agreement between 18 and 27%. Moreover, we find that the approximatedly $ 60bn of BSAs have had a limited impact, if any, on government bond spreads so far. Finally, we identify potential gains from inter-regional BSAs.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2006/twerp_752.pdf
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Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 752.

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Length: 25 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:wrk:warwec:752
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  1. Bayoumi, Tamim & Eichengreen, Barry & Mauro, Paolo, 2000. "On Regional Monetary Arrangements for ASEAN," Journal of the Japanese and International Economies, Elsevier, vol. 14(2), pages 121-148, June.
  2. Andrew K. Rose, 2002. "One Reason Countries Pay their Debts: Renegotiation and International Trade," NBER Working Papers 8853, National Bureau of Economic Research, Inc.
  3. Srivastava, V. K. & Dwivedi, T. D., 1979. "Estimation of seemingly unrelated regression equations : A brief survey," Journal of Econometrics, Elsevier, vol. 10(1), pages 15-32, April.
  4. Irwin, Gregor & Penalver, Adrian & Salmon, Chris & Taylor, Ashley, 2008. "Dealing with country diversity: challenges for the IMF credit union model," Bank of England working papers 349, Bank of England.
  5. Dodsworth, John R, 1978. "International Reserve Economies in Less Developed Countries," Oxford Economic Papers, Oxford University Press, vol. 30(2), pages 277-91, July.
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