THE SIZE OF FOREIGN EXCHANGE RESERVES AND LOCAL CURRENCY INTERNATIONALIZATION: CROSS-COUNTRY EVIDENCE

2016 ◽  
Vol 61 (05) ◽  
pp. 1550081 ◽  
Author(s):  
ZHIWEN ZHANG
Keyword(s):  
Foreign Exchange ◽  
Global Financial Crisis ◽  
Negative Impact ◽  
International Reserves ◽  
Chinese Government ◽  
Foreign Exchange Reserves ◽  
Major Power ◽  
Local Currency ◽  
Cross Country ◽  
Currency Internationalization

This paper produces the first cross-country evidence on the relationship between the size of foreign exchange reserves and local currency internationalization using a sample of Switzerland, Japan and the UK. It finds that a high ratio of foreign exchange reserves to international reserves has a significant, but negative, impact on local currency internationalization during the period 1976–2009. After controlling for interest rate differential, different indicators for long-run depreciation and volatility of exchange rates, as well as the once-in-a-century global financial crisis of 2007–2009, the above conclusion still holds. Additionally, these results are robust to different methods (Pooled OLS and Pooled IV/2SLS) and measures of the scale of foreign exchange reserves. This study is informative for any policy decisions and will provide a strategic reference for the Chinese government as it optimizes the composition of its international reserves, promotes the process of renminbi (RMB) internationalization and becomes a major power through financial development.

Trade Invoicing, Bank Funding, and Central Bank Reserve Holdings

2018 ◽  
Vol 108 ◽  
pp. 542-546 ◽  
Author(s):  
Gita Gopinath ◽  
Jeremy C. Stein
Keyword(s):  
Central Bank ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Banking System ◽  
Foreign Exchange Reserves ◽  
Reserve Currency ◽  
Bank Funding ◽  
Cross Country ◽  
Currency Composition ◽  
Bank Reserve

We develop a model that shows how the currency denomination of a country's imports influences the funding structure of its banking system, and in turn, the currency composition of its central bank's reserve holdings. The link between the dollar's role in bank funding and its role as a central bank reserve currency is stronger when the country's fiscal capacity is limited, and when exchange rates are volatile. In the data, there is a pronounced cross-country relationship between the fraction of imports that are dollar invoiced, and the fraction of central-bank foreign-exchange reserves that are held in dollars.

scholarly journals Managing Foreign Exchange Inflows: An Analysis of Sterilisation in Pakistan

2005 ◽  
Vol 44 (4II) ◽  
pp. 777-792
Author(s):  
Asad Jan ◽  
Ather Elahi ◽  
M. A. Zahid
Keyword(s):  
Foreign Exchange ◽  
Capital Inflows ◽  
Exchange Market ◽  
Foreign Exchange Reserves ◽  
Local Currency ◽  
Monetary Authorities ◽  
Export Competitiveness ◽  
Capital Outflows ◽  
Trade And Exchange

A number of developing countries from Asia, Latin America and Eastern Europe have experienced surge in capital inflows during recent years.1 These inflows have potential effects on macroeconomic stability; export competitiveness, and inflation. If not properly managed, these inflows can induce appreciation of local currency leading to serious repercussions for the rest of the economy. Under these conditions, the proactive role of monetary authorities in the management of capital inflows was highly desirable, wherein they intervened in the domestic exchange market in order to contain volatility in exchange rate besides accumulation of foreign exchange reserves. The main instruments available to deal with the possible effects of large capital inflows include sterilised intervention, fiscal tightening, trade and exchange liberalisation including easing controls on capital outflows. The foreign exchange interventions are typically accompanied by active sterilisation policy to keep inflation under control.

IMPACT OF FREEZING OF FCAS: THE CASE OF PAKISTAN

2012 ◽  
Vol 01 (06) ◽  
pp. 01-06
Author(s):  
Hafiz Abdur Rashid ◽  
Ali Raza ◽  
Syed Usman Izhar ◽  
Muhammad Waqas Baig
Keyword(s):  
Foreign Exchange ◽  
Foreign Investment ◽  
Banking Sector ◽  
Negative Impact ◽  
Positive Impact ◽  
Foreign Debt ◽  
Foreign Exchange Rates ◽  
International Banking ◽  
Foreign Exchange Reserves ◽  
The Impact

Foreign investment and foreign exchange reserves have ample importance for developing countries. So, there is a needed to encourage the foreign and domestic investors whose confidence was suffer by the unexpected decision of freezing of FCAs. The purpose of this study was to identify the areas that were affected after the decision of freezing of FCAs. Moreover, the impact of freezing decision on economy of Pakistan also indicated. More sophisticated impact on banking sector, balance of payment, foreign exchange reserves, foreign debt, and foreign investment. Study found the negative impact of freezing decision of FCAs on foreign banking and positive impact on domestic banking but Pakistan banking sector was disconnected from the international banking; insatiability in balance of payment was increased; the foreign investment and exports was reduced. Resultantly, foreign exchange reserves were reduced and foreign exchange rates was increased. Therefore, it is suggested to increase the confidence of foreign investors in order to increase the foreign investment and foreign exchange reserves. Discussion of conclusions and recommendations were also provided.

scholarly journals THE DETERMINANTS OF INDONESIA’S COAL EXPORTS DEMAND TO SIX ASIAN COUNTRIES

2021 ◽  
Vol 6 (1) ◽  
pp. 66
Author(s):  
Deni Aditya Susanto ◽  
Randy Admi
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Power Plants ◽  
Negative Impact ◽  
Coal Production ◽  
Export Demand ◽  
Asian Countries ◽  
Foreign Exchange Reserves ◽  
Export Destination ◽  
Positive Effect

Coal is one of the most needed commodities globally because of its power plants and industrial machinery. According to World Coal Institute (2018), the world coal trade is dominated by several producing countries, Indonesia (ranked 2nd with 28.21 percent). Indonesia's coal exports are influenced by determinants of demand from export destination countries. This study will test at least four demand determinants in destination countries for their effects on Indonesian exports: exchange rate, foreign exchange reserves, population, and coal production. The study used six Asian countries (Japan, South Korea, India, Thailand, Philippines, and Malaysia) over 2008-2018. The methodology used is multiple linear regression with a series of chow and Hausman tests. Each variable has been tested by t-test (partial) and f test (simultaneous), and R2 test to analyze the percentage of the influence of the model on the dependent variable. This study revealed that the variable foreign exchange reserves and population growth of six Asian countries have a significant positive effect on Indonesia's coal export. Simultaneously, the exchange rate and coal production of the destination countries were not proven to have a negative impact but positively affected coal export. All variables have a significant and partially significant effect so that the model can explain the coal export variable at 93.08 percent (Adjust R-squared).Keywords: Coal Export, Demand DeterminantsJEL Classification: C2, F1, Q31

scholarly journals Foreign Exchange Reserves as a Shock Protection – the Example of Bosnia and Herzegovina

2018 ◽  
Vol 15 (27) ◽  
Author(s):  
Tijana Šoja ◽  
Zumreta Galijašević
Keyword(s):  
Financial Crisis ◽  
Foreign Exchange ◽  
Bosnia And Herzegovina ◽  
Global Financial Crisis ◽  
Comparative Method ◽  
Foreign Exchange Reserves ◽  
Adequate Level ◽  
Shock Protection ◽  
The Global Financial Crisis

Significant increase in foreign exchange reserves in recent decades, including the period of the global financial crisis of 2008 and 2009, has intensified research on the importance and role of foreign exchange reserves and their adequate level. Although the financial crisis has emphasised the importance of maintaining an adequate level of foreign exchange reserves, there is insufficient consensus on the level of foreign exchange reserves that should be maintained in the event of crises and shocks.This paper explores foreign exchange reserves of Bosnia and Herzegovina and their adequate level over the period from 2005 to 2015 as well as in the event of a shock which can be generated by internal or external factors.The aim of this paper is to examine whether foreign exchange reserves of Bosnia and Herzegovina were sufficient in the observed period as well as in the event of shocks that national economy could be exposed to.For the research purposes, comparative method and the application of sensitivity analysis and scenarios were used to analyse and evaluate the adequacy of foreign exchange reserves of Bosnia and Herzegovina. The final results demonstrate thatduring the observed period foreign exchange reserves of Bosnia and Herzegovinawere adequate. However, in the case of extreme shocks Bosnia and Herzegovinadoes not possess the sufficient level of foreign exchange reserves. Such findings recommendto the Central Bank of Bosnia and Herzegovina, together with other economicpolicies, additional efforts to accumulate foreign exchange reserves in themedium term.

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