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Are All Measures of International Reserves Created Equal? An Empirical Comparison of International Reserve Ratios

  • Cheung, Yin-Wong
  • Yuk-Pang Wong, Clement

Using available annual data of 174 economies since 1957, we examine the similarities and differences of seven international reserve ratios. While individual international reserve ratios display substantial variations across economies, they are associated with an economy?s characteristics including geographic location, income level, stage of development, degree of indebtedness, and exchange rate regime. The association pattern varies across time and type of international reserve ratios. Interestingly, there is only limited evidence that Asian and non-Asian economies have significantly different international reserve hoarding behavior. Our results suggest that the inference about whether an economy is hoarding too many or too few international reserves depends on the choice of international reserve ratio. Further, different international reserve ratios exhibit different persistence profiles, but the evidence of dependence on structural characteristics is rather weak.

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Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2007-24.

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Date of creation: 2007
Date of revision:
Handle: RePEc:zbw:ifwedp:5729
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  1. Yin-Wong Cheung & Xingwang Qian, 2007. "Hoarding of International Reserves: Mrs Machlup’s Wardrobe and the Joneses," CESifo Working Paper Series 2065, CESifo Group Munich.
  2. Jaewoo Lee, 2004. "Insurance Value of International Reserves: An Option Pricing Approach," IMF Working Papers 04/175, International Monetary Fund.
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  4. Aizenman, Joshua & Lee, Yeonho & Rhee, Yeongseop, 2004. "International Reserves Management and Capital Mobility in a Volatile World: Policy Considerations and a Case Study of Korea," Santa Cruz Department of Economics, Working Paper Series qt65p8p9qq, Department of Economics, UC Santa Cruz.
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  9. T. J. Courchene & G. M. Youssef, 1967. "The Demand for International Reserves," Journal of Political Economy, University of Chicago Press, vol. 75, pages 404.
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  12. Mark Granovetter, 2005. "The Impact of Social Structure on Economic Outcomes," Journal of Economic Perspectives, American Economic Association, vol. 19(1), pages 33-50, Winter.
  13. M S Mohanty & Philip Turner, 2006. "Foreign exchange reserve accumulation in emerging markets: what are the domestic implications?," BIS Quarterly Review, Bank for International Settlements, September.
  14. 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.
  15. Thomas D. Willett, 2007. "Why the Middle is Unstable: The Political Economy of Exchange Rate Regimes and Currency Crises," The World Economy, Wiley Blackwell, vol. 30(5), pages 709-732, 05.
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  17. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 85-104, Fall.
  18. Jeffrey A. Frankel, 1999. "No Single Currency Regime is Right for All Countries or At All Times," NBER Working Papers 7338, National Bureau of Economic Research, Inc.
  19. Yin-wong Cheung & XingWang Qian, 2007. "Hoarding of International Reserves: Mrs Machlup¡¦s Wardrobe and the Joneses," Working Papers 132007, Hong Kong Institute for Monetary Research.
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