Foreign reserve holdings: an extended study through risk-inspired motives

Gerti Shijaku () and Elona Dushku

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the demand for foreign reserve holdings for the Albanian small open economy. The model is estimated through the Vector Error Correction Model approach. Results provide supportive evidence that reserve accumulation is more sensitive to precautionary motives rather than mercantilist ones. Other results reconfirm that current account patterns and fiscal imbalances are the main driving forces behind reserve holding. By contrast, reserve was yet again found less sensitive regarding the opportunity cost and mercantilist motives.

Keywords: Foreign reserve holdings, trade openness; short-term capital movements, VECM (search for similar items in EconPapers)
JEL-codes: C52 F32 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-mon
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Published in Economic Review, Bank of Albania 2016 H2 (2017): pp. 40-51

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79199

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