The Demand for International Reserves and Exchange Rate Adjustments: TheCase of LDCs, 1964-1972 / Sebastian Edwards.

Format:

Book

Author/Creator:

Edwards, Sebastian.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1063.

NBER working paper series no. w1063

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

The Demand for International Reserves and Exchange Rate Adjustments

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1983.

Summary:

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.

Notes:

Print version record

1983.