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Prolonged Reserves Accumulation, Credit Booms, Asset Prices and Monetary Policy in Asia

Pierre L. Siklos Andrew J. Filardo ()
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Pierre L. Siklos Andrew J. Filardo: Wilfrid Laurier University, http://viessmanncentre.ca/pierre-siklos/

Authors registered in the RePEc Author Service: Andrew Filardo and Pierre Siklos ()

LCERPA Working Papers from Laurier Centre for Economic Research and Policy Analysis

Abstract: This paper examines past evidence of prolonged periods of foreign exchange reserves accumulation in the Asia-Pacific region. Several proxies for this unobserved variable are considered, including a newly proposed one based on a factor model. We focus on identifying periods of prolonged interventions and identify its key macro-financial determinants. Two broad conclusions emerge from the stylized facts and the econometric evidence. First, the best protection against costly reserves accumulation is a more flexible exchange rate. Second, the necessity to accumulate reserves as a bulwark against goods price inflation is misplaced. Instead, there is a strong link between asset price movements and the likelihood of accumulating foreign exchange reserves that are costly. Policy implications are also drawn.

Keywords: foreign exchange reserves accumulation; monetary and financial stability (search for similar items in EconPapers)
JEL-codes: F41 F32 E44 D52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon, nep-opm and nep-sea
Date: 2015-02-01, Revised 2015-02-01
Note: LCERPA Working Paper No. 2015-4
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http://www.lcerpa.org/public/papers/LCERPA_2015_4.pdf

Related works:
Journal Article: Prolonged Reserves Accumulation, Credit Booms, Asset Prices and Monetary Policy in Asia (2016) Downloads
Working Paper: Prolonged reserves accumulation, credit booms, asset prices and monetary policy in Asia (2015) Downloads
Working Paper: Prolonged reserves accumulation, credit booms, asset prices and monetary policy in Asia (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:wlu:lcerpa:0086

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