Hoarding of International Reserves: A Comparison of the Asian and Latin American Experiences

HKIMR Working Paper No. 7/2008

35 Pages Posted: 16 Jul 2008

See all articles by Yin-Wong Cheung

Yin-Wong Cheung

City University of Hong Kong - Department of Economics & Finance; University of California, Santa Cruz - Department of Economics; University of California at Santa Cruz - Department of Economics

Hiro Ito

Portland State University - Department of Economics

Date Written: April 2008

Abstract

We examine the empirical determinants of the demand for international reserves and compare the experiences of some Asian and Latin American economies. Our empirical results indicate that different vintages of the model of international reserves give different inferences about the appropriate level of international reserves. The developed and developing economies have equations of the demand for international reserves that are quite different from each other. Further, the Asian economies and the Latin American economies have different empirical determinants of the demand for international reserves. Our results highlight the complexity of evaluating whether an economy is holding an excessive or deficient level of international reserves - the inference can be heavily dependent on the choice of a benchmark model. A direct comparison affirms the perception that the Asian economies tend to hold more international reserves than the Latin American economies.

Keywords: Foreign Exchange Reserves, Macro Determinants, Financial Factors, Institutional Variables

JEL Classification: F31, F33, F34, F36

Suggested Citation

Cheung, Yin-Wong and Ito, Hiro, Hoarding of International Reserves: A Comparison of the Asian and Latin American Experiences (April 2008). HKIMR Working Paper No. 7/2008. Available at SSRN: https://ssrn.com/abstract=1160924 or http://dx.doi.org/10.2139/ssrn.1160924

Yin-Wong Cheung (Contact Author)

City University of Hong Kong - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

University of California, Santa Cruz - Department of Economics ( email )

435 Engineering 2
Santa Cruz, CA 95064
United States
831-459-4247 (Phone)
831-459-5077 (Fax)

University of California at Santa Cruz - Department of Economics ( email )

1156 High Street
Santa Cruz, CA 95064
United States

Hiro Ito

Portland State University - Department of Economics ( email )

Portland, OR 97207-0751
United States
503-725-3930 (Phone)
503-725-3945 (Fax)

HOME PAGE: www.econ.pdx.edu

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