How Shocks Affect International Reserves? A Quasi-Experiment of Earthquakes

31 Pages Posted: 20 Oct 2020

See all articles by Yothin Jinjarak

Yothin Jinjarak

Victoria University of Wellington - School of Economics & Finance

Ilan Noy

Victoria University of Wellington

Quy Ta

affiliation not provided to SSRN

Date Written: 2020

Abstract

We evaluate the change in international reserves in the aftermath of significant external shocks. We examine the response of international reserves to shocks by using a quasi-experimental setup and focusing on earthquakes. The estimation is done on a panel of 103 countries over the period 1979–2016. We find that in the five years following a large earthquake (i) countries exposed accumulate reserves, for precautionary reasons, (ii) trade openness is positively associated with the post-earthquake reserves accumulation, (iii) episodes of reserves depletion are observed in countries under the fixed exchange rate and/or inflation targeting regimes, and (iv) the patterns of reserves holding post-earthquake vary with a country’s income level.

Keywords: disasters, earthquakes, international reserves, foreign exchange holding

JEL Classification: F310, F410, Q540

Suggested Citation

Jinjarak, Yothin and Noy, Ilan and Ta, Quy, How Shocks Affect International Reserves? A Quasi-Experiment of Earthquakes (2020). CESifo Working Paper No. 8632, Available at SSRN: https://ssrn.com/abstract=3715284

Yothin Jinjarak

Victoria University of Wellington - School of Economics & Finance ( email )

P.O. Box 600
Wellington 6001
New Zealand

Ilan Noy

Victoria University of Wellington ( email )

P.O. Box 600
Wellington, 6140
New Zealand

Quy Ta (Contact Author)

affiliation not provided to SSRN

No Address Available

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