A Cross-Country Empirical Analysis of International Reserves

47 Pages Posted: 28 May 2009

See all articles by Yin-Wong Cheung

Yin-Wong Cheung

University of California, Santa Cruz - Department of Economics

Hiro Ito

Portland State University - Department of Economics

Date Written: May 2009

Abstract

Using data from more than 100 economies for the period of 1975 to 2005, we conduct an extensive empirical analysis of the determinants of international reserve holdings. Four groups of determinants, namely, traditional macro variables, financial variables, institutional variables, and dummy variables that control for individual economies’ characteristics are considered. We find that the relationship between international reserves and their determinants is significantly different between developed and developing economies and is not stable over time. The estimation results indicate that, especially during the recent period, a developed economy tends to hold a lower level of international reserves than a developing one. Furthermore, there is only limited evidence that East Asian economies including China and Japan are accumulating an excessive amount of international reserves.

Keywords: developed vs developing economies, excess hoarding, macro determinants, financial factors, institutional variables

JEL Classification: F31, F34, F36

Suggested Citation

Cheung, Yin-Wong and Ito, Hiro, A Cross-Country Empirical Analysis of International Reserves (May 2009). CESifo Working Paper Series No. 2654, Available at SSRN: https://ssrn.com/abstract=1410569 or http://dx.doi.org/10.2139/ssrn.1410569

Yin-Wong Cheung (Contact Author)

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

Engineering 2, Department of Economics
University of California
Santa Cruz, CA 95064
United States
831-459-5077 (Fax)

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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