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Cost of Holding Excess Reserves - The Indian Experience

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  • Abhijit Sen Gupta

    (Indian Council for Research on International Economic Relations)

Abstract

Most of the existing literature has used single reserve adequacy measures to evaluate the volume of excess reserves. In this paper, we employ empirical methods to generate a comprehensive reserve adequacy measure, incorporating the various objectives of holding reserves, and compare the actual reserve accumulation experience of various emerging markets with the prediction of our empirical model. Using this comprehensive reserve adequacy measure, we calculate the cost of holding excess reserves for India by looking at three different alternative uses of resources. We find that India is foregoing asmuch as 2% of its GDP by accumulating reserves instead of employing resources in alternative uses.

Suggested Citation

  • Abhijit Sen Gupta, 2008. "Cost of Holding Excess Reserves - The Indian Experience," Finance Working Papers 22165, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:22165
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    References listed on IDEAS

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    Cited by:

    1. Ghosal, Sayantan & Thampanishvong, Kannika, 2013. "Does strengthening Collective Action Clauses (CACs) help?," Journal of International Economics, Elsevier, vol. 89(1), pages 68-78.

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    More about this item

    Keywords

    Reserve Holdings; Reserve Management;

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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