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How Shocks Affect International Reserves? A Quasi-Experiment of Earthquakes

Yothin Jinjarak, Ilan Noy () and Quy Ta

No 8632, CESifo Working Paper Series from CESifo

Abstract: We evaluate the change in international reserves in the aftermath of significant external shocks. We examine the response of international reserves to shocks by using a quasi-experimental setup and focusing on earthquakes. The estimation is done on a panel of 103 countries over the period 1979–2016. We find that in the five years following a large earthquake (i) countries exposed accumulate reserves, for precautionary reasons, (ii) trade openness is positively associated with the post-earthquake reserves accumulation, (iii) episodes of reserves depletion are observed in countries under the fixed exchange rate and/or inflation targeting regimes, and (iv) the patterns of reserves holding post-earthquake vary with a country’s income level.

Keywords: disasters; earthquakes; international reserves; foreign exchange holding (search for similar items in EconPapers)
JEL-codes: F31 F41 Q54 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon and nep-opm
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