International Reserve Management and Firm Investment in Emerging Market Economies
We examine the effects of active international reserve management (IRM) conducted by central banks of emerging market economies (EMEs) on firm investment in the presence of global financial shocks. Using firm-level data from 46 EMEs from 2000 to 2018, we document three findings. First, active IRM is found to affect firm investment positively. The effect strengthens when the magnitude of adverse external financial shocks increases. Second, financially constrained firms, compared to unconstrained ones, are less responsive to active IRM. Third, we find that 30% of the causal effect of IRM on firm investment is mediated through the country credit spread channel.
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Copy CitationJoshua Aizenman, Yin-Wong Cheung, and Xingwang Qian, "International Reserve Management and Firm Investment in Emerging Market Economies," NBER Working Paper 29303 (2021), https://doi.org/10.3386/w29303.Download Citation
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Non-Technical Summaries
- Analysis of the behavior of 21,447 firms in 46 emerging economies finds active central bank management of international reserves...
Published Versions
Joshua Aizenman & Yin-Wong Cheung & Xingwang Qian, 2025. "International Reserve Management and Firm Investment in Emerging Market Economies," Open Economies Review, Springer, vol. 36(2), pages 503-540, April, DOI: 10.1007/s11079-024-09768-3. citation courtesy of 
Joshua Aizenman & Yin-Wong Cheung & Xingwang Qian, 2025. "International Reserve Management and Firm Investment in Emerging Market Economies," Open Economies Review, vol 36(2), pages 503-540.
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