DETERMINANTS OF FOREIGN EXCHANGE RESERVES IN CROATIA: A QUANTILE REGRESSION APPROACH

Mile Bošnjak, Gordana Kordic () and Ivan Budimir ()
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Gordana Kordic: University of Zagreb
Ivan Budimir: Croatian National Bank

Economic Thought and Practice, 2019, vol. 28, issue 1, 159-173

Abstract: The paper explores quantile regression approach to examine determinants of foreign exchange reserves in Croatia at different levels. The research is based on quarterly time series data on foreign exchange reserves, GDP level and EUR/HRK exchange rate level. Time span ranges from 2000Q1 to 2018Q3. The results revealed the GDP (at constant prices) and nominal exchange rate against euro (daily, end of quarter) as significant determinants of foreign exchange reserves in Croatia. Furthermore, at the higher levels of foreign exchange reserves its elasticity to changes in its determinants is higher. Consequently, at the lower levels of foreign exchange reserves the elasticities are found to be lower. Having reached 7th decile of foreign exchange reserves the elasticity to exchange rates vanishes.

Keywords: foreign exchange reserves; Croatia; quantile regression approach; exchange rate; GDP (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 F32 F34 F37 G15 (search for similar items in EconPapers)
Date: 2019
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