On the Interest Rate Elasticity of the Demand for International Reserves: Some Evidence from Developing Coutries / Sebastian Edwards.

Format:

Book

Author/Creator:

Edwards, Sebastian.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1532.

NBER working paper series no. w1532

Language:

English

Subjects (All):

Foreign exchange.

Foreign exchange--Mathematical models.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

On the Interest Rate Elasticity of the Demand for International Reserves

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Cambridge, Mass. : National Bureau of Economic Research, 1985.

Summary:

Contrary to what is suggested by the theory, most empirical studies on the demand for international reserves have failed to find a significant(negative) coefficient for the opportunity cost of holding reserves. In this paper it is argued that the reason for this is that the opportunity cost of holding international reserves has been measured incorrectly. In the empirical analysis presented in this paper the spread between the interest rate at which countries can borrow from abroad and LIBOR is used as a proxy for the net opportunity cost for holding reserves. The results obtained using data for a group of developing countries for 1976-198O show that when this net opportunity cost is used, the regression coefficient is significantly negative.

Notes:

Print version record

1985.