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Article
Publication date: 6 August 2020

Antonio Francisco de Almeida da Silva Junior

This work presents a model of a two-period economy to discuss the link between the precautionary motivation for holding international reserves and the country's monetary…

Abstract

Purpose

This work presents a model of a two-period economy to discuss the link between the precautionary motivation for holding international reserves and the country's monetary policy concerns due to a crisis.

Design/methodology/approach

There are two possible states of nature in the second period of the economy: a normal state and a crisis state. These states of nature represent uncertainty to the policy maker and he can insure against a crisis. The household has a constant-elasticity-of-substitution (CES) utility function, where utility depends on consumption and money.

Findings

By allowing money in the utility function and in the household financial constraint and considering that the objective of the central bank is to smooth inflation, it is concluded that monetary policy plays a role in the precautionary motivation of holding international reserves.

Practical implications

The model can be used to calculate optimal reserves holdings in its complete or even in its simplified version. Furthermore, it is possible to evaluate the impact of the intra-temporal substitution elasticity between consumption and real money in the decision of accumulating international reserves.

Originality/value

Higher intra-temporal substitution elasticities implies in more insurance via international reserves, and this discussion is not found in the existent literature on international reserves.

Details

International Journal of Emerging Markets, vol. 16 no. 8
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 4 December 2017

Mohammad Kashif, S. Thiyagarajan and P. Sridharan

The purpose of this paper is to explore the determinants of international reserves in Algeria using economic growth and real effective exchange rate variables. The paper…

Abstract

Purpose

The purpose of this paper is to explore the determinants of international reserves in Algeria using economic growth and real effective exchange rate variables. The paper used quarterly data from 1985Q1 to 2014Q4.

Design/methodology/approach

The study employs autoregressive distributed lag (ARDL) approach known as the bounds testing method. The ARDL technique works well for small sample studies also. The current study assesses the influence of economic growth and real effective exchange rates on international reserves in Algeria by evaluating both short-run and long-run dynamics.

Findings

The study establishes a long-run relationship between international reserves, economic growth and real effective exchange rate. It also reveals that economic growth has a positive impact on international reserves while real effective exchange rate shows a negative effect.

Originality/value

This paper tries to provide a complete picture of the determinants of international reserves in Algeria. Foreign trade policy makers of Algeria can use the model estimated here to draw pertinent policies regarding international reserves.

Details

African Journal of Economic and Management Studies, vol. 8 no. 4
Type: Research Article
ISSN: 2040-0705

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Book part
Publication date: 7 January 2016

George Labrinidis

The purpose of this paper is to contribute to understanding modern monetary arrangements from a Marxist perspective that takes into account recent developments in the…

Abstract

The purpose of this paper is to contribute to understanding modern monetary arrangements from a Marxist perspective that takes into account recent developments in the Marxist theory of world money. The paper treats the US dollar as a primus inter pares quasi-world money and challenges the argument of US hegemony by exploring the behavior of major capitalist states and selected developing countries, the BRICS, in so far as their official international reserves are concerned. The findings reveal a clear pattern in the behavior of major capitalist states in terms of the size and form of their reserves with the variations in them implying a hierarchical structure of the corresponding quasi-world moneys. The analysis focuses on developed countries and treats them individually. The merit of this approach, distinctive in the literature on international reserves, is that it reveals the above-mentioned pattern which is blurred when Japan is included. The results imply that current international monetary arrangements reflect and promote multipolarity and competition on the geopolitical scene, the evolution of which is historical.

Details

Analytical Gains of Geopolitical Economy
Type: Book
ISBN: 978-1-78560-336-5

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Book part
Publication date: 4 December 2018

Indranarain Ramlall

Abstract

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Economic Areas Under Financial Stability
Type: Book
ISBN: 978-1-78756-841-9

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Article
Publication date: 1 February 1983

A.N. McLeod

The functioning of the international monetary system as institutionalised under the Articles of Agreement of the International Monetary Fund after World War II began to…

Abstract

The functioning of the international monetary system as institutionalised under the Articles of Agreement of the International Monetary Fund after World War II began to deteriorate after 1957. By that date many European countries had sufficiently recovered or improved their competitive positions in world markets to enable them to replenish their external reserves and make their currencies convertible. Up to that point their acquisitions of gold and US dollars must be viewed as a healthy redistribution of international reserves, But thereafter dollar surpluses replaced the alleged dollar shortages of earlier years on international markets. Recurring runs on the dollar appeared, vying with the periodic runs on sterling as threats to the stability of the system.

Details

International Journal of Social Economics, vol. 10 no. 2
Type: Research Article
ISSN: 0306-8293

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Book part
Publication date: 19 November 2016

Taranza T. Ganziro and Robert G. Vambery

Abstract

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The Exorbitant Burden
Type: Book
ISBN: 978-1-78560-641-0

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Article
Publication date: 1 August 2019

Shibananda Nayak and Mirza Allim Baig

The purpose of this paper is to examine the likely determinants of the demand for official international reserves (hereafter reserves) for India and China in the long run…

Abstract

Purpose

The purpose of this paper is to examine the likely determinants of the demand for official international reserves (hereafter reserves) for India and China in the long run in a basic buffer stock model. The paper also examines the role of domestic money market disequilibrium in the short-run demand for official reserves for both the countries in a dynamic synthesis model.

Design/methodology/approach

The study used quarterly data for the time period 1993:Q1–2015:Q4. The long-run model is being estimated by following the Frenkel–Jovanovic (1981) buffer stock model and includes the determinants such as transaction motive variable (GDP or Imports), opportunity cost variable (domestic interest rate), precautionary motive variable (volatility of reserves) and exchange rate. The study also examined the role of domestic money market disequilibrium in addition to the above variables in the short-run reserve demand model. The money market disequilibrium term is expected to be negative and significant in the short run. The study employed autoregressive distributed lag bound testing approach to co-integration and unrestricted error-correction model (UECM) approach developed by Pesaran et al. (2001) for estimating the long-run and short-run models, respectively.

Findings

The co-integration test suggests the existence of long-run relationship between international reserves and its determinants. In the long run, all the variables are statistically significant with expected sign, except domestic interest rate variable for China. It is also found that, the money market disequilibrium term in the short run is negative and significant which validates that an excessive money demand (supply) induces an inflow (outflow) of international reserves for both India and China with a lag of four quarters. The recursive residual tests (CUSUM and CUSUMSQ) confirm the stability of both long-run and short-run reserve demand models.

Practical implications

The findings and policy implications of this study may be useful for the policy makers of the similar emerging economies for designing money and currency policies.

Originality/value

This paper is a comparative study which systematically analyzed the reserve demand behavior of the two emerging economies India and China. The study integrates the domestic money market with the international reserve demand behavior for these two economies.

Details

International Journal of Emerging Markets, vol. 14 no. 5
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 1 May 1997

Anghel N. Rugina

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual…

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Abstract

The equation of unified knowledge says that S = f (A,P) which means that the practical solution to a given problem is a function of the existing, empirical, actual realities and the future, potential, best possible conditions of general stable equilibrium which both pure and practical reason, exhaustive in the Kantian sense, show as being within the realm of potential realities beyond any doubt. The first classical revolution in economic thinking, included in factor “P” of the equation, conceived the economic and financial problems in terms of a model of ideal conditions of stable equilibrium but neglected the full consideration of the existing, actual conditions. That is the main reason why, in the end, it failed. The second modern revolution, included in factor “A” of the equation, conceived the economic and financial problems in terms of the existing, actual conditions, usually in disequilibrium or unstable equilibrium (in case of stagnation) and neglected the sense of right direction expressed in factor “P” or the realization of general, stable equilibrium. That is the main reason why the modern revolution failed in the past and is failing in front of our eyes in the present. The equation of unified knowledge, perceived as a sui generis synthesis between classical and modern thinking has been applied rigorously and systematically in writing the enclosed American‐British economic, monetary, financial and social stabilization plans. In the final analysis, a new economic philosophy, based on a synthesis between classical and modern thinking, called here the new economics of unified knowledge, is applied to solve the malaise of the twentieth century which resulted from a confusion between thinking in terms of stable equilibrium on the one hand and disequilibrium or unstable equilibrium on the other.

Details

International Journal of Social Economics, vol. 24 no. 5
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 1 February 1982

W.M. Scammell

There have been three essays in international monetary reform during the past 40 years. The first was unique in that, at Bretton Woods in 1944, representatives of two…

Abstract

There have been three essays in international monetary reform during the past 40 years. The first was unique in that, at Bretton Woods in 1944, representatives of two nations dominated the planning of a world monetary system which was, in essence, to endure for twenty‐five years. The uniqueness of this lay in the clean start made possible by the vacuum left by the war — an opportunity certainly not to be repeated. The fact that the Bretton Woods system prevailed, with modification and adaptation, for almost as long as the international gold standard testifies to the fact that its planning was not ill done.

Details

Journal of Economic Studies, vol. 9 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 February 2001

Anghel N. Rugina

Suggests the reorganizations of the international monetary fund, re‐directing its path towards conditions of stable equilibrium. Discusses basic deficiencies of the…

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1177

Abstract

Suggests the reorganizations of the international monetary fund, re‐directing its path towards conditions of stable equilibrium. Discusses basic deficiencies of the Bretton Woods Agreement of 1944 which set out the purposes of the internaitonal monetary fund. Suggests basic conditions for stable equilibrium at the international level, before making recommendations for a new sounder foundation of the international monetary fund in relation to its administration, the prerogatives and rules of functioning of its monetary department, an exension of monetization of other suitable commodities to serve as international liquidity reserves, and the fund’s banking department.

Details

International Journal of Social Economics, vol. 28 no. 1/2
Type: Research Article
ISSN: 0306-8293

Keywords

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