Real Exchange Rate and International Reserves in the Era of Financial Integration
The global financial crisis has brought increased attention to the consequences of international reserves holdings. In an era of high financial integration, we investigate the relationship between the real exchange rate and international reserves using nonlinear regressions and panel threshold regressions over 110 countries from 2001 to 2020. Our study shows the level of financial-institution development plays an essential role in explaining the buffer effect of international reserves. Countries with a low development of their financial institutions may manage the international reserves as a shield to deal with the negative consequences of terms-of-trade shocks on the real exchange rate. We also find the buffer effect is stronger in countries with intermediate levels of financial openness.
-
-
Copy CitationJoshua Aizenman, Sy-Hoa Ho, Luu Duc Toan Huynh, Jamel Saadaoui, and Gazi Salah Uddin, "Real Exchange Rate and International Reserves in the Era of Financial Integration," NBER Working Paper 30891 (2023), https://doi.org/10.3386/w30891.Download Citation
-
Published Versions
Joshua Aizenman & Sy-Hoa Ho & Luu Duc Toan Huynh & Jamel Saadaoui & Gazi Salah Uddin, 2024. "Real exchange rate and international reserves in the era of financial integration," Journal of International Money and Finance, vol 141. citation courtesy of 
Related
Mentioned in the News
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
