International reserve holdings: interest rates matter!

Christopher Ball () and Javier Reyes

Applied Economics Letters, 2009, vol. 16, issue 4, 343-348

Abstract: We argue that the literature on optimal international reserve holdings in an era of high-capital mobility fails to find interest rates is a strongly significant factor because of the endogeneity of interest rates and reserves under fixed exchange rate regimes. Using two-stage least squares we control this and regain statistical significance for interest rates.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:16:y:2009:i:4:p:343-348

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DOI: 10.1080/13504850601018619

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