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Article
Publication date: 28 February 2023

Gouda Abdel Khalek and Amany Rizk

This paper aims to obtain a recent estimate of the cost of precautionary foreign reserve accumulation that emerging market and developing economies (EMDEs) had to endure to…

1746

Abstract

Purpose

This paper aims to obtain a recent estimate of the cost of precautionary foreign reserve accumulation that emerging market and developing economies (EMDEs) had to endure to protect themselves against the risks of financial globalization. In addition, the study estimates the cost of excess reserves in emerging market economies (EMEs) using various reserve adequacy indicators that reflect potential sources of foreign exchange drains and vulnerability in EMEs' balance of payments.

Design/methodology/approach

This paper begins by explaining the accumulation of foreign reserves in EMDEs as a self-protection strategy against the risks of financial globalization. Next, it sheds light on the different types of economic costs of foreign reserve accumulation. Finally, it estimates the cost of foreign reserve accumulation in EMEs during the period (1990–2018) and in EMDEs during the period (1990–2015) due to data availability.

Findings

Results indicate that the cost of accumulating foreign reserves as a self-protection strategy in EMDEs and EMEs' was huge compared to their development financing needs. Applying various reserve adequacy measures demonstrates that many of the EMEs were holding inadequate precautionary reserves in 2018. Actually, this reflects the significant increase in external short term debt that many of the EMEs have witnessed since the eruption of the global financial crisis (2008). Thus increasing reserves in EMEs with weak reserve buffers and higher external debt is critical as they are more vulnerable to external shocks and capital flow reversals. Also given the estimated huge costs of accumulating foreign reserves, EMDEs should accompany it by other complementary self-protection policies and liquidity management policies to free up resources for productive investment.

Originality/value

The study contributes to the literature by estimating the cost of precautionary foreign reserve accumulation imposed on EMDEs during an extended period of time that covers a decade after the onset of the global financial crisis. Also to the authors' knowledge, this is the first study that estimates the cost of excess reserves in EMEs using various reserve adequacy indicators including the International Monetary Fund (IMF) assessing reserve adequacy (ARA) approach.

Details

Review of Economics and Political Science, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2356-9980

Keywords

Open Access
Article
Publication date: 12 June 2017

Santiago Valcacer Rodrigues, Heber José de Moura, David Ferreira Lopes Santos and Vinicius Amorim Sobreiro

This paper aims to analyse the capital structure determining factors of Latin American and US corporations after the crisis of 2008, as a means of comparing theoretical…

2198

Abstract

Purpose

This paper aims to analyse the capital structure determining factors of Latin American and US corporations after the crisis of 2008, as a means of comparing theoretical assumptions and empirical results in markets of different efficiency levels.

Design/methodology/approach

The study sample comprises 1,091 companies belonging to the six largest economies in Latin America plus the USA, in the years 2009 to 2013. The authors performed a regression with data from a balanced overview, which were obtained by using the criterion of minimum weighted square.

Findings

The results demonstrated differences in determining factors of capital structure between companies from Latin America and from the USA. The pecking order theory was mostly observed in Latin American companies and the trade-off theory greater was closely aligned with US firms.

Originality/value

This research brings new contributions to the issue, once the differences and determinative of the debt profile in companies from different economic contexts are compared.

Propósito

Este artículo analiza los factores determinantes de la estructura de capital de las corporaciones latinoamericanas y estadounidenses después de la crisis de 2008, para comparar los supuestos teóricos y los resultados empíricos en mercados de diferentes niveles de eficiencia.

Diseño/metodología/enfoque

La muestra del estudio comprende 1.091 empresas pertenecientes a las seis mayores economías de América Latina y Estados Unidos, entre los años 2009 y 2013. Se realizó una regresión con datos de una visión general equilibrada, que se obtuvo utilizando el criterio de cuadrado mínimo ponderado.

Hallazgos

Los resultados muestran diferencias en los factores determinantes de la estructura de capital entre empresas de América Latina y de Estados Unidos. La Teoría de la selección jerárquica se observó principalmente en las empresas latinoamericanas y la Teoría del intercambio más cercana estaba estrechamente alineada con las firmas estadounidenses.

Originalidad/valor

Esta investigación aporta nuevas contribuciones al tema, una vez que comparamos las diferencias y determinantes del perfil de la deuda en empresas de diferentes contextos económicos.

Palabras clave

Endeudamiento, Intercambio, Asimetría de información, Selección jerárquica, Regresión agrupada

Tipo de artículo

Artículo de investigación

Details

Journal of Economics, Finance and Administrative Science, vol. 22 no. 42
Type: Research Article
ISSN: 2077-1886

Keywords

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