Munich Personal RePEc Archive

The Mystery behind Foreign Reserve Sterilization: Empirical Evidence from The Gambia

Joof, Foday and Tursoy, Turgut (2020): The Mystery behind Foreign Reserve Sterilization: Empirical Evidence from The Gambia.

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Abstract

This paper investigates the impact of the foreign reserve on the domestic money supply and the level of sterilization by employing the Auto Regressive Distributed Lag for short-run estimation, the Fully Modified OLS for long run estimation and Granger Causality on a monthly data from 2002 to 2019. The short-run and long-run results revealed that foreign reserve has a positive statistically significant impact on money supply; this suggests a total lack of sterilization on the part of Central Bank of The Gambia. The Granger causality confirms a feedback association between the foreign reserve and broad money supply.

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