Foreign exchange reserve adequacy and exogenous shocks

Moore, Winston; Glean, Adrian

doi:10.1080/00036846.2015.1083085

Cited by 12 publications

(7 citation statements)

References 19 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…This strategy includes risks other than inflation, such as additional costs, monetary imbalances, overheating in credit and asset markets, and potential problems in the banking sector. Moore and Glean (2016) research exchange reserve adequacy using a cost-benefit approach, starting with the common assumption that the optimal level of reserves is 12 weeks of imports. They use a dynamic random effects probit model of financial crises to evaluate the benefits and a panel growth equation to determine the costs.…”

Section: Brief Literature Overviewmentioning

confidence: 99%

“…However, we still know nothing about the adequacy of foreign exchange reserves. To shed some light on this we use Equation (2) in the research data and methodology section of this paper, while recognising that the international economics literature often assumes that a country should maintain sufficient reserves to cover at least onequarter of imports (Moore and Glean 2016). The results for the case of Serbia are provided in Figure 1.…”

Section: Determinants Of Fx Reservesmentioning

confidence: 99%

“…As national economies have become more globalised and integrated the role of foreign exchange reserves has become more important, especially in small and open economies. One strand of literature discusses the adequacy of reserve holdings (Dabla-Norris et al, 2011;Moore & Glean, 2016). Another strand examines the determinants of reserve accumulation (Sula, 2011;Fang-Yuan & Jun-Guo, 2013;Bošnjak et al, 2019) and the appropriateness of the quantile regression approach to illustrate the effects of the determinants on different levels of foreign exchange reserves.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Determinants of foreign exchange reserves in Serbia and North Macedonia

2020

View full text Add to dashboard Cite

This paper employs a quantile regression approach to explore the determinants and properties of international foreign exchange reserves in Serbia and North Macedonia, at various foreign exchange levels. The observed period covers quarterly data for 2005q1-2019q1. The results reveal quantile-dependent determinants of foreign exchange reserves and enable comparison between the two countries, showing co-movements between monetary policy and economic fluctuations. Following the estimates obtained in this research, the paper compares the role of foreign exchange reserves in Serbia and North Macedonia.

show abstract

Section: Brief Literature Overviewmentioning

confidence: 99%

Section: Determinants Of Fx Reservesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Determinants of foreign exchange reserves in Serbia and North Macedonia

2020

View full text Add to dashboard Cite

show abstract

“…The source of these funds comes from the country's foreign exchange reserves, which is an important aspect of seeing how far the country is in carrying out international trade and shows how strong a country's economy is. The accumulation of large foreign exchange reserves is one of the things used by developing countries to balancing effect of macroeconomic dynamics (Moore & Glean, 2016). The effectiveness of storing large foreign exchange reserves increases the resilience of the country,s economy against shocks that occur anytime (Allegret , 2018).…”

Section: Introductionmentioning

confidence: 99%

Determinant of Foreign Exchange Reserve in 6 Asian Developing Country Before and During Crisis Pandemic COVID-19

Khoirunnisa

Oktavilia

2022

j. ekon. terap.

View full text Add to dashboard Cite

This research looks at the factors that affect foreign exchange reserves in developing countries in Asia 6 in the period before and during the crisis due to the covid-19 pandemic. Used panel data regression estimates, which are a combination of time series data (Q1 2018-Q4 2020) and cross sections (India, Indonesia, Philippines, Thailand, Mongolia, and Uzbekistan). The variables used are foreign exchange reserves as the dependent variable then exchange rate, GDP, FDI, net exports, the period before and during the crisis (dummy) as independent variables. The results of this study are partially variable exchange rate, GDP, FDI, net exports have a significant positive effect on foreign exchange reserves. The period before and during crisis (dummy) have a different effect on foreign exchange reserves. Keywords: Foreign Exchange Reserves, Developing Countries, Pandemic COVID-19, Panel. Classification JEL: F31, O1, C33

show abstract

“…Thus, the competitiveness benefit of holding reserves may reduce the effective cost of hoarding reserves and induce governments to prefer reserve-hoarding over the alternative. Moore and Glean (2016) asserts that the notion of reserve adequacy is not static and is intimately associated with the occurrence of financial crises as well as exogenous shocks. The traditional benchmarks in international macroeconomics is that a country should maintain reserves that can cover at least three (3) months of imports.…”

Section: The Emp Index and The Reserves Adjuster Problemmentioning

confidence: 99%

Developing and testing new measures of exchange market pressure in Sub-Saharan Africa

Klutse

View full text Add to dashboard Cite

Attempts by economists to identify exchange rate crisis have led to the development of the exchange market pressure (EMP) index, which has been modified to include the interest rate variable, to better capture pressure on domestic currencies. The index in this state (current) is more appropriate for countries who operate an inflation targeting (IT) monetary policy framework or a policy framework close to it. This observation among others makes the EMP index sensitive to some assumptions if sub-Saharan African countries (SSA) are involved. SSA countries employ different monetary policy frameworks making the usage of the EMP index across board misleading. Using different variations of the model specified by authors specialised in the subject, this study identified an EMP index which will be effective in identifying currency crisis in 32 sub-Saharan African (SSA) countries for which data is available. Using a ridge regression model and a dynamic OLS model as a control, the study showed that the original EMP index was good in explaining changes in the exchange rate variable in SSA if the changes in reserves are adjusted for by broad money. The explanatory power is further enhanced if the components are normalised by their standard deviations without adjusting for the money variable. It was discovered that the current version of the index which includes the interest rate variable is not good at explaining changes in the exchange rate variable in SSA even though it had some explanatory effect. Using a discrete threshold regression model this study resolves two major problem associated with the use of the exchange market pressure index in identifying exchange rate crisis. The results point to un-even implementation of the Inflation Targeting framework in the study countries.Dwelling on the assumption that a country will be able to wade of speculative attack on its currency if it has reserves that can cater for previous year's imports or short-term external debt or broad money, this study proposes two variations to the original index by Girton and Ropper (1975). Using a Generalised Method of Moments (GMM) regression model and a ridge regression model, this study found the index with the reserve variable adjusted for by imports to have the most explanatory effect on the exchange rate variable in SSA. This study recommends a combination of these indexes since the phase of economic development is not static.In testing the EMP indexes on the banking crisis in Ghana, the retail prices of premium gasoline in Ghana and Kenya and also testing the impact of the exchange rate variable in the debt sustainability of Ghana and Kenya. This study found that the exchange rate vii played a significant role in the banking sector and fluctuations in the retail price of premium gasoline in Ghana in the long run. It was also found to be putting increasing pressure on the gross debt of both Ghana and Kenya. The study recommends the creating of domestic buffers leading to the accumulation of the needed reserves to smoothen volatilities in the ...

show abstract

Foreign exchange reserve adequacy and exogenous shocks

Cited by 12 publications

References 19 publications

Determinants of foreign exchange reserves in Serbia and North Macedonia

Determinants of foreign exchange reserves in Serbia and North Macedonia

Determinant of Foreign Exchange Reserve in 6 Asian Developing Country Before and During Crisis Pandemic COVID-19

Developing and testing new measures of exchange market pressure in Sub-Saharan Africa

Contact Info

Product

Resources

About