Can governments sleep more soundly when holding international reserves? A banking and financial vulnerabilities perspective

Audrey Sallenave, Jean-Pierre Allegret () and Tolga Omay
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Jean-Pierre Allegret: GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique

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Abstract: We use a sample of 40 developing and emerging countries over the period 1995- 2015 to assess the effectiveness of international reserve holding as a crisis mitigator. We test the relevance of the reserve accumulation decreasing returns assumption by estimating the most recent version of the PSTR model. We find that increasing stocks of international reserves allows domestic authorities to mitigate the negative impacts of financial and banking vulnerabilities on GDP growth rates leading to reject the decreasing returns assumption. This evidence is robust to sensitivity checks.

Keywords: Banking vulnerabilities; Financial vulnerabilities; External shocks; Emerging and developing countries; Panel Smooth Transition Regression model; Reserves accumulation (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ban, nep-cba, nep-fdg, nep-mon and nep-opm
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Published in Applied Economics, 2024, 56 (15), pp.1748-1762. ⟨10.1080/00036846.2023.2177597⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03945433

DOI: 10.1080/00036846.2023.2177597

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