Understanding reserve volatility in emerging markets: a look at the long-run |
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| Affiliation: | 1. University of Texas Rio Grande Valley, Edinburg, TX, United States of America;2. University of Tennessee at Chattanooga, Chattanooga, TN, United States of America;3. Morgan State University, Baltimore, MD, United States of America;4. University of Texas at El Paso, El Paso, TX, United States of America;1. Federal Reserve Bank of New York, 33 Liberty Street, Main 3, New York, NY 10045, United States;2. Federal Reserve Bank of New York & Nova School of Business and Economics, 33 Liberty Street, Main 3, New York, NY 10045, United States |
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| Abstract: | In this paper, we examine long-run determinants of cross-country variation in reserve volatility for 30 emerging market economies from 1973 to 2000. Reserve holdings and openness are found to be the most important explanatory variables of reserve volatility. The empirical results are robust for a range of control variables, including monetary variables, the degree of financial development, and the level of indebtedness. We view these results as establishing interesting stylized facts that may be helpful in evaluating reserve volatility as a crisis indicator. |
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