international reserves
Recently Published Documents


TOTAL DOCUMENTS

471
(FIVE YEARS 83)

H-INDEX

32
(FIVE YEARS 2)

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Joseph Bitar ◽  
Martin Boileau

Abstract In the context of a managed float regime, we adopt the portfolio balance view to show the effects of the net foreign assets of an economy and its gross international reserves level on interest rate differentials. We argue that the interest rate differential can be explained by three components, where the components are the expected depreciation of the domestic currency, a default risk premium, and a portfolio balance premium. Our theoretical analysis suggests that the interest differential is a convex function of the level of gross international reserves. In particular, the differential and gross reserves are inversely related at low levels of reserves, but positively at higher levels. We evaluate our framework for the case of Lebanon. We find that the differential is inversely related to both net foreign assets and gross international reserves. These findings are then confirmed with data from Indonesia and Mexico.


Author(s):  
Chee-Hong Law ◽  
Siew-Voon Soon ◽  
K. U. Ehigiamusoe

This paper investigates the nonlinear effect of institutional quality on the holding of international reserves by applying the two-step system generalized method of moments on data consisting of 67 countries from 1996 to 2016. The hypothesis is that the association between institutional quality and international reserves has an inverted U pattern. The coefficient sign of the institutional quality and its square term supports the hypothesis. Besides, the marginal effects suggest that the higher the institutional quality index, the lower the demand for reserves. The outputs indicate the importance of good institutional quality in reducing the overdependence on international reserves.


Sign in / Sign up

Export Citation Format

Share Document