Managing the Monetary Consequences of Reserve Accumulation in Emerging Asia

Alice Y. Ouyang, Ramkishen S. Rajan () and Tom Willett
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Alice Y. Ouyang: Chinese Academy of Public Finance and Public Policy, The Central University of Finance and Economics
Tom Willett: Claremont Graduate University and Claremont McKenna College

No 202007, Working Papers from Hong Kong Institute for Monetary Research

Abstract: The huge increase in international reserve holdings by Asian countries since the 1997 crisis has been one of the most important recent developments on the international financial scene. These buildups have contributed substantially to concerns about the creation of excessive global liquidity. How justified these concerns are depends heavily on the extent to which the reserve accumulating countries have been able to sterilize the effects on their domestic monetary aggregates. We use a unified theoretical framework to undertake dynamic estimations of the magnitude of sterilization and offset coefficients (which measure the degree of capital mobility) for a large set of Asian economies. We find that despite substantial capital mobility there has been a high degree of effective sterilization to date.

Keywords: Asia; Balance of Payments Function; Capital Mobility; Monetary Reaction Function; Reserves; Sterilization (search for similar items in EconPapers)
JEL-codes: E51 E52 E58 (search for similar items in EconPapers)
Date: Written 2007

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Related works:
Journal Article: Managing the Monetary Consequences of Reserve Accumulation in Emerging Asia (2008)
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