Foreign reserve holdings: an extended study through risk-inspired motives.

Shijaku, Gerti and Dushku, Elona (2017): Foreign reserve holdings: an extended study through risk-inspired motives. Published in: Economic Review, Bank of Albania No. 2016 H2 (2017): pp. 40-51.

Abstract

This paper examines the demand for foreign reserve holdings for the Albanian small open economy. The model is estimated through the Vector Error Correction Model approach. Results provide supportive evidence that reserve accumulation is more sensitive to precautionary motives rather than mercantilist ones. Other results reconfirm that current account patterns and fiscal imbalances are the main driving forces behind reserve holding. By contrast, reserve was yet again found less sensitive regarding the opportunity cost and mercantilist motives.

• Item Type: MPRA Paper
• Language: English
• Keywords: Foreign reserve holdings, trade openness; short-term capital movements, VECM
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements

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