On the exchange-rate elasticity of the demand for international reserves: Some evidence from industrial countries |
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Authors: | Mohsen Bahmani-Oskooee Farhang Niroomand |
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Abstract: | Summary and Conclusion In this paper we tried to investigate the supposition that a change in exchange rate lowers the demand for international reserves. This goal was achieved by incorporating the real effective exchange rate into a standard real reserve demand equation from the literature. The model was estimated for a sample of 13 countries for which the effective exchange rate was available, using pooled quarterly data over the 1973-1985 period. The empirical results revealed that a change in exchange rate indeed reduces the demand for reserves supporting the theoretical arguments of the previous studies. |
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