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Robert N Mccauley - One of the best experts on this subject based on the ideXlab platform.
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Currency composition of Foreign Exchange Reserves
Journal of International Money and Finance, 2020Co-Authors: Robert N MccauleyAbstract:Abstract This paper analyses the factors that govern the choice of the currency composition of official Foreign Exchange Reserves. First, we introduce a new panel dataset on the key currencies in Foreign Exchange Reserves of about 60 economies in the 1999–2017 period. Second, we show that the currency composition of Reserves relates strongly to the co-movement of the domestic currency with key currencies and the currency invoicing of trade. These factors represent attributes of the dollar or the euro rather than of the United States or the euro area. They exert about equal effects on the currency composition of Foreign Exchange Reserves. We demonstrate that these findings are robust to a host of other possible factors.
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the currency composition of Foreign Exchange Reserves
Journal of International Money and Finance, 2020Co-Authors: Robert N MccauleyAbstract:This paper analyses the factors that govern the choice of the currency composition of official Foreign Exchange Reserves. First, we introduce a new panel dataset on the key currencies in Foreign Exchange Reserves of about 60 economies in the 1999-2017 period. Second, we show that the currency composition of Reserves relates strongly to the co-movement of the domestic currency with key currencies and the currency invoicing of trade. These factors represent attributes of the dollar or the euro rather than of the United States or the euro area. They exert about equal effects on the currency composition of Foreign Exchange Reserves. We demonstrate that these findings are robust to a host of other possible factors.
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managing Foreign Exchange Reserves in the crisis and after
BIS Papers chapters, 2011Co-Authors: Robert N Mccauley, Jeanfrancois RigaudyAbstract:The recent global financial crisis has posed a great challenge to official Foreign Exchange reserve managers. Events brutally reminded them of the original raison d’etre of Foreign Exchange Reserves, namely to deal with emergencies. Reserve managers faced the possibility of a need to mobilise rapidly funds in liquidity portfolios, and even investment portfolios, to meet the Foreign currency needs of domestic banks (and in some places firms) or to support the Foreign Exchange value of the domestic currency. At the same time, the most common short-term placements, namely bank deposits, came into question as writedowns of asset-backed securities burned through bank equity and interbank funding liquidity dried up. And then the failure of Lehman Brothers exposed risks in repo and money market mutual funds, in which some central banks had invested. While central banks struggled with manifold challenges to their management of short-term funds, their losses on longer-term investments in private asset-backed securities – the securities that set the crisis in motion – sometimes showed up in surprising places, but appear to have been neither widespread nor large.
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choosing instruments in managing dollar Foreign Exchange Reserves
BIS Quarterly Review, 2003Co-Authors: Robert N Mccauley, Ben S C FungAbstract:Two years ago, managers of official Foreign Exchange Reserves were pondering the uncertain but serious prospect of a shrinking stock of outstanding US Treasury securities. This concern reflected the fact that some three quarters of global Foreign Exchange Reserves were held in US dollars, and their management traditionally favoured US Treasury securities. Today, with the US economy growing slowly after a shallow recession, and the effects of discretionary tax cuts being felt, the outstanding stock of Treasury securities is once again expanding. Moreover, while the risk of a war of unknown duration and expense attaches more than usual uncertainty to any forecast of future US deficits, there is little doubt that this expansion will continue for some time. The challenge posed by the gradual disappearance of the outstanding stock of the traditional investment vehicle no longer seems so pressing as it was two years ago. Managers of official Foreign Exchange Reserves no longer face the gradual disappearance of the outstanding stock of their traditional investment vehicle as a given.The pressure to achieve returns in an environment of lower interest rates may nevertheless pose other challenges to reserve managers. It puts the spotlight on reserve managers’ choice of instrument. This note analyses the instruments in which central banks have invested their dollar Reserves in recent years and poses three questions: How is the official dollar portfolio invested?How has the choice of instrument evolved over time? And how have recent events, including the return of recession and US fiscal deficits, lower Treasury yields and corporate defaults, altered its evolution?
Augustine C Arize - One of the best experts on this subject based on the ideXlab platform.
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Foreign Exchange Reserves in asia and its impact on import demand
International journal of economics and finance, 2012Co-Authors: Augustine C Arize, John MalindretosAbstract:Some Asian countries have experienced increases in the level of their Foreign Exchange Reserves as well as increases in their import volume. Theory suggests that as the level of Exchange Reserves increases, it may affect the demand for imports since more funds will be available for imports. In this paper, we employ quarterly data of five Asian countries and test the null hypothesis that the import demand behavior in India, Japan, Korea, Singapore and Thailand are not determined by real income, relative import price and Foreign Exchange Reserves. The empirical analysis of import demand behavior is presented using the dynamic error-correction model, which allows an explicit parameterized division of effects into long-run influences, short-term adjustment and error-correction term. It uses econometric techniques organized around Johansen, Harris-Inder, and Hansen Lccointegration analyses; fully modified OLS, dynamic OLS and ARDL to estimate long-and-short run demand elasticities.
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Foreign Exchange Reserves and import demand evidence from latin america
The World Economy, 2007Co-Authors: Augustine C Arize, Thomas OsangAbstract:This paper investigates the impact of Foreign Reserves, domestic real income and relative import prices on import demand for seven Latin American countries. We differentiate empirically between the short-run and long-run impact of Reserves, income and prices on imports. The paper has three main results. First, we show that there exists a unique long-run relationship among real imports, real income, relative import prices and real Foreign Exchange Reserves for all seven countries. Second, we find that increases in Foreign Exchange Reserves exert a significant positive effect on import demand in both the long run and the short run in all countries. However, the economic impact of Foreign Exchange Reserves is rather small. Finally, we find that the long- and short-run impact of real domestic income on import demand is positive as well, while the effect of relative prices is negative.
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Foreign Exchange Reserves and import demand in a developing economy the case of pakistan
International Economic Journal, 2004Co-Authors: Augustine C Arize, John Malindretos, Elias C GrivoyannisAbstract:Conventional specifications of import demand in LDCs have commonly been plagued by implausible and unstable parameter estimates. This paper shows the importance of imposing long-run income homogeneity and of including Foreign Exchange Reserves when estimating import demand function for an LDC. Using several cointegration techniques, it is shown that there is one linear relationship among real imports, real income, relative import prices and real Foreign Exchange Reserves. In addition, by employing stability tests for cointegrated systems by Hansen (1992a), the paper shows that only when Foreign Exchange Reserves and long-run unit-income homogeneity are accounted for does a constant parameter, long-run equilibrium relation emerge for Pakistan. Also, the ensuing short-run dynamic model is constant and data-coherent. Finally, the study provides information on the speed of adjustment to equilibrium and the median and mean time lags of adjustments of real imports to changes in their determinants. The results indicate a quick response of real imports to changes in their determinants.
Thomas Osang - One of the best experts on this subject based on the ideXlab platform.
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Foreign Exchange Reserves and import demand evidence from latin america
The World Economy, 2007Co-Authors: Augustine C Arize, Thomas OsangAbstract:This paper investigates the impact of Foreign Reserves, domestic real income and relative import prices on import demand for seven Latin American countries. We differentiate empirically between the short-run and long-run impact of Reserves, income and prices on imports. The paper has three main results. First, we show that there exists a unique long-run relationship among real imports, real income, relative import prices and real Foreign Exchange Reserves for all seven countries. Second, we find that increases in Foreign Exchange Reserves exert a significant positive effect on import demand in both the long run and the short run in all countries. However, the economic impact of Foreign Exchange Reserves is rather small. Finally, we find that the long- and short-run impact of real domestic income on import demand is positive as well, while the effect of relative prices is negative.
Christopher J Neely - One of the best experts on this subject based on the ideXlab platform.
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chinese Foreign Exchange Reserves policy choices and the u s economy
Canadian Parliamentary Review, 2017Co-Authors: Christopher J NeelyAbstract:China is both a major trading partner of the United States and the largest official holder of U.S. assets in the world. The value of Chinese Foreign Exchange Reserves peaked at just over $4 trillion in June 2014 but has since declined to $3.19 trillion (as of August 2016). This very large decline in Foreign Exchange Reserves is unprecedented, and some analysts have speculated that continued sales of these (mostly U.S.) assets might significantly impact the U.S. and global economies. This article explains the reasons for this large decline in official assets, China’s available policy choices, and how these choices could affect the U.S. economy.
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chinese Foreign Exchange Reserves and the u s economy
Economic Synopses, 2016Co-Authors: Christopher J NeelyAbstract:China’s very substantial Foreign Exchange Reserves have declined precipitously and the Chinese policy corrections may impact the U.S. economy.
Shihong Zeng - One of the best experts on this subject based on the ideXlab platform.
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study on chinese Foreign Exchange Reserves
Journal of Applied Finance and Banking, 2012Co-Authors: Shihong ZengAbstract:In this paper we attempt to determine whether the Chinese Foreign Exchange Reserves have been too large. We empirically analyzed the Foreign Exchange Reserves first by using the rate analysis method and then using the cost-profit method. Using the rate analysis method we found that the Chinese actual Foreign Exchange Reserves greatly exceeded the 3-month import Foreign Exchange demands and also that the optimal Foreign Exchange Reserves demands were calculated to be 40% of the total Foreign debt balance. Every year the Chinese Foreign Exchange Reserves have exceeded the total amount of import Foreign Exchange demand as well as exceeding the Foreign Exchange demands for the Foreign debt balance and profit returning Foreign Exchange demands of Foreign investment enterprises. In addition we have found that only from 2000 to 2003 did the Chinese actual Foreign Exchange Reserves exceed the optimal Foreign Exchange Reserves calculated using the Heller model [11] from 1966. In other years they have basically been equal to or less than the optimal value for Foreign Exchange Reserves, which indicates that there are limits to the Heller model.
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Foreign Exchange Reserves Demand Model Based on Chinese Government Utility Maximization and Analysis of Chinese Foreign Exchange Reserves
Modern Economy, 2011Co-Authors: Shihong ZengAbstract:At the end of 2010 China’s Foreign Exchange reserve reached $2847.34 billion, the author designs the maximum government utility function when consider the China government buys a part Foreign Exchange if company earns, it means that the China government will increase Ren-Min-Bi Yuan. And it will cause inflation. The inflation will cause disutility to government. Finally it gets the optimal fuction. VAR Regress finds the fitted value and actual value of Foreign Exchange Reserves is nearly equal within 99.8%. The thesis gets the long term equilibrium relation of the nature logarithm of variables by VEC model, which are Foreign Exchange Reserves, standard error of export, marginal propensity to import, the opportunity cost for Foreign Exchange Reserves, marginal output to export. Using the sample datas in China 1980-2006 and VEC, we can find that (1) the government-holding Foreign Exchange Reserves has positive correlation with the export standard error, (2) the government-holding Foreign Exchange Reserves has positive correlation with the marginal propensity to import. The data and regression method are all different, but all have the positive correlation between the Foreign Exchange Reserves and export standard error.