International reserve holdings: interest rates matter

International reserve holdings: interest rates matter

We argue that the literature on optimal international reserve holdings in an era of high-capital mobility fails to find interest rates is a strongly significant factor because of the endogeneity of interest rates and reserves under fixed exchange rate regimes. Using two-stage least squares we contro...

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Veröffentlicht in:Applied economics letters 2009-03, Vol.16 (4), p.343-348
Hauptverfasser: Ball, Christopher P., Reyes, Javier
Format: Artikel
Sprache:eng
Schlagworte:
Bank reserves
Capital movement
Economic analysis
Economic models
Fixed exchange rates
Interest rates
International monetary economics
Reserves
Studies
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Zusammenfassung:We argue that the literature on optimal international reserve holdings in an era of high-capital mobility fails to find interest rates is a strongly significant factor because of the endogeneity of interest rates and reserves under fixed exchange rate regimes. Using two-stage least squares we control this and regain statistical significance for interest rates.
ISSN:1350-4851
1466-4291
DOI:10.1080/13504850601018619