Open AccessOut-of-sample analysis of international reserves for emerging economies with a dynamic panel model
Author(s) -
Kuk Mo Jung,
Ju Hyun Pyun
Publication year - 2020
Publication title -
panoeconomicus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.289
H-Index - 14
eISSN - 2217-2386
pISSN - 1452-595X
DOI - 10.2298/pan170330001j
Subject(s) - endogeneity , economics , emerging markets , sample (material) , econometrics , hoarding (animal behavior) , panel data , unit root , monetary economics , macroeconomics , ecology , chemistry , foraging , chromatography , biology
Using data on 70 emerging countries for 1990-2011, we re-examine the validity of both traditional and recently proposed determinants of international reserves. The dynamic panel model considers panel unit root, endogeneity, and country heterogeneity and reveals that not only traditional determinants but also new financial variables - M2/GDP and foreign capital inflows through over-the-counter markets - have significant effects on reserves hoarding. More importantly, out-of-sample forecasts show that the dynamic model yields the best goodness-of-fit, and its predicted values successfully account for the recent patterns in reserve accumulations.