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International reserves holding and the political risk: evidence from selected emerging economies

Siti Nurazira Mohd Daud and Abd Halim Ahmad

Global Business and Economics Review, 2014, vol. 16, issue 3, 332-348

Abstract: The objective of this paper is to investigate the relationship between financial and economic uncertainty (risk) and the demand for international reserves. In addition, the association between this relationship and the political risk condition is further analysed for selected emerging economies. By using panels of 20 emerging countries, the empirical results show that the decision by the emerging economies to hold international reserves is largely dependent on the fluctuations in the financial risk indicators. In addition, the interdependency between the demand reserves function and the type of financial risk indicator also varies across countries' political conditions.

Keywords: international reserves; self-insurance motivation; country risk; political risk; emerging economies; financial uncertainty; economic uncertainty; risk indicators. (search for similar items in EconPapers)
Date: 2014
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