Monetary autonomy in emerging market economies: The role of foreign reserves

This paper examines trends in monetary autonomy and their interactions with financial integration, currency regimes and foreign reserves for recent decades in emerging Asian and Latin American economies. Our main findings are the following: First, most emerging Asian economies have increased monetary autonomy mainly due to changes in currency regimes toward floating regimes, while emerging Latin American economies have shown mixed results on monetary autonomy. Second, in all sample economies, the accumulation of foreign reserves has contributed to retaining monetary autonomy, probably implying the role of foreign reserves as an anchor for monetary autonomy in emerging market economies.