The determinants of International Reserves in the Emerging countries: a non linear approach

Anne-Laure Delatte and Julien Fouquau

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Abstract: In this article, we adopt a nonlinear approach to examine the dynamics of the international reserves holdings by the emerging economies. To do so, we estimate the demand for international reserves with a Panel Smooth Transition Regression (PSTR) model that loosens two restricting hypotheses, homogeneity and time-stability. We find evidence for the presence of a nonlinear behaviour in the demand for international reserves, a result that is new to the literature. The coefficients are found to change smoothly, as a function of two threshold variables - out of five candidates tested in total. Our specification accounts for the acceleration of foreign exchange reserves accumulation that the linear specifications fail to explain.

Date: 2011
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Citations: View citations in EconPapers (8)

Published in Applied Economics, 2011, Vol. 43 (n° 28), pp 4179-4192. ⟨10.1080/00036846.2010.489886⟩

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Working Paper: The Determinants of International Reserves in the Emerging Countries: a Non-Linear Approach (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00822326

DOI: 10.1080/00036846.2010.489886

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