Eliza, Nor and M., Azali and Law, Siong-Hook and Lee, Chin (2008): Demand For International Reserves in ASEAN-5 Economies.
Download (173kB) | Preview
The ASEAN-5 economies were observed to increase their demand for international reserves after the 1997 Asian financial crisis. This was coincided with their consistent current account surplus during the same period. Thus, this study attempts to investigate the existence of long-run relationship between reserve demand and current account for the period of 1997-2005. The Autoregressive Distributed Lag (ARDL) bounds test approach as proposed by Pesaran, Shin, and Smith (2001) was employed, and the empirical results revealed that current account surplus leads to the rise in the demand for international reserves in Indonesia, Malaysia, and Singapore.
|Item Type:||MPRA Paper|
|Original Title:||Demand For International Reserves in ASEAN-5 Economies|
|Keywords:||Bound Test, ARDL Approach, International Reserves, ASEAN-5|
|Subjects:||F - International Economics > F3 - International Finance
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
|Depositing User:||M. Azali|
|Date Deposited:||25. Nov 2008 06:40|
|Last Modified:||13. Feb 2013 03:52|
Aizenman, J., Lee, Y. and Rhee, Y. 2004. “International reserve management and capital mobility in a volatile world: policy considerations and a case study of Korea”, NBER Working Paper No. 10534. National Bureau of Economic Research, Cambridge, M.A.
Aizenman, J., Lee, Y. and Rhee, Y. 2004. “International reserve management and capital mobility in a volatile world: policy considerations and a case study of Korea”, Journal of the Japanese and International Economies, Vol. 21 No 1, pp. 1-15.
Alfaro, L. and Kanczuk, F. 2007. “Optimal reserves management and sovereign debt”, NBER Working Paper No. 13216, National Bureau of Economic Research, Cambridge, M.A.
Asian Development Bank. various issues. Key Indicators of Developing Asian and Pacific Countries, Manila.
Bandinger, H. 2004. “Austria’s demand for international reserves and monetary disequlibrium: the case of a small open economy with a fixed exchange rate regime”, Economica, No. 71 Vol. 1, pp. 39-55.
Bardsen, G. 1989. “Estimation of long-run coefficients in error correction models”, Oxford Bulletin of Economics and Statistics, Vol. 51 No. 3, pp. 345-350.
Cheung, Y. W. and Qian, X. A. 2007. “Hoarding of international reserves: Mrs Machlup’s wardrobe and the Joneses”, CESifo Working Paper No. 2065, Center for Economic Studies, Munich, Germany.
Cifarelli, G. and Paladino, G. 2006. “The international reserves gult: is it for real? Department of Economics University of Florence Working Paper No. 142, University of Florence, Italy.
Dunn, R. M. and Mutti, J. H. 2000. International Economics (5th Ed.), Routledge, London.
Eaton J. and Gersowitz, M. 1980. “LDC participation in international financial markets, debt and reserves”, Journal of Development Economics, Vol. 7 No. 1, pp. 3-21.
Edison, H. 2003. “Are foreign exchange reserves in Asia too high? Chapter II, World Economic Outlook, International Monetary Fund, Washington D. C., pp. 78-92.
Engle, R.E. and Granger, C. W. J. 1987. “Cointegration and error correction: representation, estimation, and testing”,
Econometrica, Vol. 55 No. 2, pp. 251-276.
Frenkel, J. 1974a. “The demand for international reserves by developed and less-developed countries”, Economica, Vol. 41 No. 161, pp. 14-24.
Frenkel, J. 1974b. “Openness and the demand for international reserves”, in Aliber, R. Z.(Ed.), National Monetary Policies and International Financial System, University of Chicago Press, Chicago.
Frenkel, J. and Jovanovic, B. 1981. “Optimal international reserves: a stochastic framework”, Economic Journal, Vol. 91 No. 362, pp. 507-514.
Genberg, H., McCauley, R., Park, Y. C., and Persuad, A. 2005. “Official reserves and currency management in Asia: myth, reality, and the future”, Geneva Report on the World Economy, No. 7.
Heller, H. R. 1966. “Optimal international reserves”, Economic Journal, Vol. 76, pp. 296-311.
Hendry, D. F. and Ericsson, N. R. 1991. “Modelling the demand for narrow money in the United Kingdom and the United States”, European Economic Review, Vol. 35 No. 4, pp. 833-886.
Huang, G. 1995. “Modeling China’s demand for international reserves”, Applied Financial Economics, Vol. 5 No. 5, pp. 357-366.
Huang, T. H. and Shen, C. H. 1999. “Applying the seasonal error correction model to the demand for international reserves in Taiwan”, Journal of International Money and Finance, Vol. 18 No. 1, pp. 107-131.
International Monetary Fund. 2007. International Financial Statistics, Washington, D.C.
Jo, G. J. 2007. “The determinants of international reserve hoarding in Korea: cointegration and error correction approach”, Kiemyung University, Korea.
Johansen, S. 1988. “Statistical analysis of cointegrating vectors”, Journal of Economic Dynamic and Control, Vol. 12 No. 2-3, pp. 231-254.
Johansen, S. and Juselius, K. 1990. “Maximum likelihood estimation and inference on cointegration-with applications to the demand for money”, Oxford Bulletin of Economics and Statistics, Vol. 52 No. 2, pp. 169-210.
Kapur, B. K. 2005. “Capital flows and exchange rate volatility: Singapore’s experience”, NBER Working Paper No. 11369, National Bureau of Economic Research, Cambridge, M.A.
Kusumaningtuti, S. S. 2004. “Country experience of Indonesia on external debt management”, Regional Workshop on Capacity Building for External Debt Management in the Era of Rapid Globalization, Bangkok.
Mah, J. S. 2000. “An empirical examination of the disaggregated import demand of Korea – the case of information technology products”, Journal of Asian Economies, Vol. 11 No. 2, pp. 237-244.
McCauley, R. N. 2003. “Capital flows to East Asia since 1997 crisis”, BIS Quarterly Review, June 2003, pp. 41-56. Narayan, P. K. 2005. “The saving and investment nexus for China: evidence from cointegration tests”, Applied Economics, Vol. 37 No. 17, pp. 1979-1990.
Oh, G., Park, D., Park, J., and Yang, D. Y. 2003. “How to mobilize the Asian savings within the region: securitization and credit enhancement for the development of East Asia’s bond market”, KIEP Working Paper 03-02, Korea Institute for International Economic Policy, Korea.
Pesaran, M. H., Shin, Y. and Smith, R. J. 2001. “Bounds testing approach to the analysis of level relationships”, Journal of Applied Econometrics, Vol. 16 No. 3, pp. 289-326.
Prabheesh, K. P., Malathy, D. and Madhumati, R. 2008. “Demand for foreign exchange reserves in India: a cointegration approach”, South Asian Journal of Management, Vol. 14 No. 2, pp. 36-46.
Ra, H. R. 2007. “Demand for international reserves: a case study of Korea”, Journal of the Korean Economy, Vol. 8 No. 1, pp. 147-175.
Ramachandran, M. 2004. “The optimal level of international reserves: evidence for India”, Economics Letters, Vol. 83 No. 3, pp. 365-370.
Ramachandran, M. 2006. “The upsurge of foreign reserves in India”, Economic Modeling, Vol. 28 No. 7, pp. 797-809.
Ramachandran, M. and Srinivasan, N. 2007. “Asymmetric exchange rate intervention and international reserve accumulation in India”, Economics Letters, Vol. 94 No. 2, pp. 259-265.
Taniuchi, M. 2006. “Global imbalances and Asian economies”, JBICI Review No. 14, Japan Bank for International Cooperation Institute, Japan.
Wei, W. X. and Zhu, M. N. 2000. “Modelling state foreign exchange reserves under the managed floating exchange rate system in China”, Journal of Systems Science and Systems Engineering, Vol. 9 No. 3, pp. 280-289.
World Bank. 2005. Global Development Finance, Washington, D.C.
World Bank. 2007. World Development Indicators, Washington, D.C.