How much should I hold? Reserve Adequacy in Emerging Markets and Small Islands
IMF Working Papers, August 1, 2012
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- How much should I hold? Reserve Adequacy in Emerging Markets and Small Islands
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Bibliographic details
- Authors: Nkunde Mwase
- Published: August 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475505559.001
Paper overview
- Title: How much should I hold? Reserve Adequacy in Emerging Markets and Small Islands
- Author: Nkunde Mwase
- Publication type: IMF Working Papers; Working Paper No. 2012/205
- Date: August 1, 2012
- Pages: 44
- Volume: 2012
- Issue: 205
- DOI: https://doi.org/10.5089/9781475505559.001
- Stock No: WPIEA2012205
- ISBN: 9781475505559
- ISSN: 1018-5941
Research objective and scope
- Investigates the drivers of reserves in emerging markets (EMs) and small islands (SIs).
- Develops an operational metric for estimating reserves in SIs that accounts for their unique characteristics.
- Compares the performance of the proposed metric against existing metrics in terms of reducing crisis probabilities in SIs.
Methods
- Employs quantile regression techniques to allow estimated factors driving reserves holdings to vary along the reserves’ holding distribution.
- Tests for equality among the slope coefficients of the various quantile regressions and the overall models.
- Uses F-tests to compare inter-quantile differences in reserve distribution models.
Key findings
- F-tests comparing inter-quantile differences:
- Could not reject that the models for the different quantiles of SIs reserve distribution were similar.
- Rejected similarity for the EMs distribution, suggesting that models explaining drivers of reserve holdings should take into account the country’s reserve holdings.
- Empirical analysis suggests that the proposed metric performs better than existing metrics in reducing crisis probabilities in SIs.
Subject and keywords (as listed)
- Subject: Current account, Exchange rate arrangements, Exchange rate flexibility, Exports, Financial crises, Foreign exchange, International trade, Monetary base, Money
- Keywords: country holding, crisis episode, Debt, Deleveraging, demand holding, Emerging markets, EMP, Europe, Exchange rate arrangements, Exchange rate flexibility, Exports, Global, holding, holdings model, Islands, Logit and quantile regression, models in OLS regression, Monetary base, precautionary motive, regression method, reserve distribution, reserve holding, reserve stockpile, Reserves, WP
Source: IMF Working Paper — Nkunde Mwase, "How much should I hold? Reserve Adequacy in Emerging Markets and Small Islands", Working Paper No. 2012/205, August 1, 2012; DOI: https://doi.org/10.5089/9781475505559.001