Role of Foreign Exchange Reserve in Exchange Rate Behaviour The Persisting Asymmetry: A Historical Account

Atulan Guha ()
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Atulan Guha: Indian Institute of Management Kashipur

No 5908272, Proceedings of International Academic Conferences from International Institute of Social and Economic Sciences

Abstract: Foreign exchange and monetary gold reserve is a very important factor to determine nominal exchange rate for the countries whose currency has very little use as reserve currency. Whereas, for the reserve currency countries it is not so important ?it is primarily because of their greater money pulling power internationally through rate of interest change. They have this power because their currencies are having greater use as international money. Though the international monetary systems have changed from fixed exchange rate of Gold Standard period to independent float or managed float exchange rate systems of today?s world, this asymmetry between the reserve currency countries and the other countries has not change. Though, ideally under flexible exchange rate system, the importance of foreign exchange reserve in determining nominal exchange rate should be very little. This paper takes an historical review of all the International Monetary System to establish the importance of foreign exchange reserve in determining exchange rate for developing countries; but it is not be the case with the reserve currency countries.

Keywords: Exchange Rate; Foreign Exchange Reserve; fixed exchange rate; flexible exchange rate (search for similar items in EconPapers)
JEL-codes: F31 F33 F41 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2017-10
New Economics Papers: this item is included in nep-his, nep-mon, nep-opm and nep-pay
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Published in Proceedings of the Proceedings of the 34th International Academic Conference, Florence, Oct 2017, pages 69-83

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iacpro:5908272

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