Abstract
Since the foreign reserve is endogenously determined by each country, its identification is challenging. To overcome this difficulty, we utilize the special drawing rights (SDR) allocation of USD 650 billion by the International Monetary Fund to combat the coronavirus disease pandemic. Given the stylized fact that a sudden stop is likely to depreciate foreign exchange in a very short period, it is natural to expect the SDR allocation to mitigate the risk of devaluation, especially for emerging countries, which typically face a liquidity constraint. According to our empirical results, the increase in foreign reserves by the SDR allocation appreciates the exchange rate among emerging countries while depreciating foreign generally.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
