Out-of-Sample Analysis of International Reserves for Emerging Economies with a Dynamic Panel Model

Kuk Mo Jung () and Ju Hyun Pyun
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Kuk Mo Jung: Department of Economics, Sogang University, Seoul

No 1904, Working Papers from Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy)

Abstract: Using data on 70 emerging countries for 1990-2011, we re-examine the validity of both traditional and recently proposed determinants of international reserves. The dynamic panel model considers panel unit root, endogeneity, and country heterogeneity and reveals that not only traditional determinants but also new financial variables—M2/GDP and foreign capital inflows through over-the-counter markets— have significant effects on reserves hoarding. More importantly, out-of-sample forecasts show that the dynamic model yields the best goodness-of-fit, and its predicted values successfully account for the recent patterns in reserve accumulations.

Keywords: foreign exchange reserves; dynamic panel estimation; out-of-sample analysis; emerging economies; over-the-counter markets (search for similar items in EconPapers)
JEL-codes: C23 E44 E58 F21 F31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2019
New Economics Papers: this item is included in nep-cba and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:sgo:wpaper:1904

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