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What Drove the Massive Hoarding of International Reserves in Emerging Economies? A Time‐varying Approach
Author(s) -
Delatte AnneLaure,
Fouquau Julien
Publication year - 2012
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2011.01015.x
Subject(s) - economics , hoarding (animal behavior) , econometrics , emerging markets , mercantilism , constant (computer programming) , acceleration , macroeconomics , stability (learning theory) , monetary economics , market economy , computer science , ecology , physics , foraging , classical mechanics , machine learning , biology , programming language
Existing empirical models fail to explain the surge in the accumulation of foreign exchange reserves by emerging countries during the last decade. This paper provides an estimate of the demand for international reserves on a panel of emerging countries using a time‐varying panel smooth transition regression (TV‐PSTR) model to relax the assumption of coefficient stability in the relationship. Evidence is dound that the parameters are not constant. In addition, it is observed that the coefficients remained relatively stable until 2000 and then increased gradually and strongly thereafter. The specification provided here accounts for an acceleration that linear specifications fail to explain. Finally, it is found that mercantilist motives are the major driver of this acceleration.