TY  - JOUR
AU  - Edwards,Sebastian
TI  - The Demand for International Reserves and Exchange Rate Adjustments: TheCase of LDCs, 1964-1972
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1063
PY  - 1984
Y2  - February 1984
UR  - http://www.nber.org/papers/w1063
L1  - http://www.nber.org/papers/w1063.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Business
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu
AB  - In this paper the relationship between the demand for international reserves and exchange rate adjustments is empirically investigated for agroup of LDC's. It is shown that countries that have maintained a fixed exchange rate for a long period of time have a different demand function than countries that have occasionally used exchange rate adjustments for correcting payments imbalances. The dynamics of the adjustment for both groupsof countries are also analyzed. The results show that while both groups tend to eliminate reserve disequilibria fast, those countries that have maintained a fixed rate tend to do it more slowly than countries that have occasionally devalued their currency. It Is also shown that the year prior to a devaluation, international reserves have been, on average, 30% below their short-run desired level. These results are important since they indicate that not all LDC's should be aggregated for prediction purposes. The results also have implications for the analysis of the adequacy of international reserves in less developed countries.
ER  -