Low interest rate policy and the use of reserve requirements in emerging markets

Andreas Hoffmann and Axel Löffler
Authors registered in the RePEc Author Service: Axel Loeffler

The Quarterly Review of Economics and Finance, 2014, vol. 54, issue 3, 307-314

Abstract: This paper sheds light on the link between the interest rate policy in large advanced economies with international funding and reserve currencies (the United States and the euro area) and the use of reserve requirements in emerging markets. Using reserve requirement data for 28 emerging markets from 1998 to 2012, we provide evidence that emerging market central banks tend to raise reserve requirements when interest rates in international funding markets decline or financial inflows accelerate, most likely to preserve financial stability. In contrast, when global liquidity risk rises and funding from the large advanced economies dries up, emerging markets lower reserve requirements.

Keywords: E52; E58; Reserve requirements; Foreign interest rates; Emerging markets (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (11)

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Working Paper: Low interest rate policy and the use of reserve requirements in emerging markets (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:54:y:2014:i:3:p:307-314

DOI: 10.1016/j.qref.2014.04.006

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