Hoarding of International Reserves and Sterilization in Dollarized and Indebted Countries: An Effective Monetary Policy?
University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)
May 9, 2012
GATE Working Paper No. 1208
The primary aim of this paper is to explore the effectiveness of Hoarding International Reserves and Sterilization in dollarized and indebted countries such as Turkey and Lebanon, by measuring the sterilization coefficient, and the offset coefficient. It also focuses on exploring the link between the sources of Reserves and the external debt. Using monthly data collected from the International Monetary Fund and from the Central Banks of Turkey and Lebanon between January 1994 and February 2011, we applied a 2SLS regression models and we identified explanatory variables that enabled us to estimate the aforementioned coefficients. Our results showed that despite their theoretical practice of sterilization policy, economic constrains of these countries contribute to weaken the efficacy expected from monetary policies.
Number of Pages in PDF File: 42
Keywords: monetary policy, International Reserve, sterilization, foreign liabilities, dollarized countries, Turkey, Lebanon
JEL Classification: E52, E58, F30, F34
Date posted: May 9, 2012