The International Liquidity Concept and Developing Economies Foreign Exchange Markets

Joseph Bitar

World Economics, 2024, vol. 25, issue 4, 18-38

Abstract: The concept is introduced and its importance for macroeconomic analysis in developing and emerging economies is highlighted. International liquidity is defined as the sum of: i) Central bank's gross international reserves, ii) Resident banks' international liquid assets, iii) International currency notes held by resident agents. The paper discusses the unique characteristics of foreign exchange markets in developing and emerging economies, emphasizing their local nature. It is argued that the exchange rate in these economies is determined by the country's international liquidity market.

Date: 2024
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