Prolonged Reserves Accumulation, Credit Booms, Asset Prices and Monetary Policy in Asia

Andrew Filardo ()

LCERPA Working Papers from Laurier Centre for Economic Research and Policy Analysis

Abstract: This paper examines past evidence of prolonged periods of foreign exchange reserves accumulation in the Asia-Pacific region. Several proxies for this unobserved variable are considered, including a newly proposed one based on a factor model. We focus on identifying periods of prolonged interventions and identify its key macro-financial determinants. Two broad conclusions emerge from the stylized facts and the econometric evidence. First, the best protection against costly reserves accumulation is a more flexible exchange rate. Second, the necessity to accumulate reserves as a bulwark against goods price inflation is misplaced. Instead, there is a strong link between asset price movements and the likelihood of accumulating foreign exchange reserves that are costly. Policy implications are also drawn.

Keywords: foreign exchange reserves accumulation; monetary and financial stability (search for similar items in EconPapers)
JEL-codes: D52 E44 F32 F41 (search for similar items in EconPapers)
Pages: 57
Date: 2015-02-01, Revised 2015-02-01
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon, nep-opm and nep-sea
Note: LCERPA Working Paper No. 2015-4
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Prolonged Reserves Accumulation, Credit Booms, Asset Prices and Monetary Policy in Asia (2016)
Working Paper: Prolonged reserves accumulation, credit booms, asset prices and monetary policy in Asia (2015)
Working Paper: Prolonged reserves accumulation, credit booms, asset prices and monetary policy in Asia (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:wlu:lcerpa:0086

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