Accumulation Of International Reserves Research Articles

Assessing the impact of climate change on soybean production in Argentina

Soy is the most important agricultural commodity in Argentina, with relevance in public revenues and international reserves accumulation. However, a proper impact evaluation of future losses in the context of climate change has not yet been developed. Therefore, the aim of this paper is to provide future estimates of impact evaluation for macroeconomic adaptation policies. By means of a multiple partial regression, the relation between total country soybean yields and different combinations of 28 territorial weather stations was estimated for the period 2001–2021. With the optimal model, the output was projected using future rainfall and temperature data from 150 climate models from 4 different climate change scenarios from the Copernicus database during 2022–2042. Results show a strong statistical relationship between rainfall levels and maximum temperature and total soybean yields, explaining on average 91.2% of the yield variation. The future projections showed that the general average of the four climate change scenarios projected future output at 3.8% higher than the current levels, with 30% of projections with lower and 70% with higher output values than the current production. Variability analysis showed an increase in the frequency and intensity of extreme negative events and higher aggregate than in the past: relative loss is on average 3.6% of production (USD million $13,000) compared to 2.3% of production in the historical data (USD million $7,492). The main application is the estimation of macro-fiscal impact for long-term budgetary and fiscal planning, with a parsimonious approach and open-access data that allows permanent actualization.

Heterogeneity in the nominal exchange rate response to oil price shocks in oil-exporting countries: a new episode of the ‘fear of floating’?

ABSTRACT In this paper, we propose that the heterogeneity in the nominal exchange rate response to oil price shocks in oil-exporting countries with flexible regimes is influenced by monetary authority interventions. Thus, we identify three structural oil price shocks, and we estimate pooled OLS regressions for a panel of 27 oil-exporting economies. The results show that economies with higher international reserve accumulation experience lower exchange rate appreciation during oil-specific demand shocks.

Comportamento da Taxa de Câmbio nos BRICS

ABSTRACT This article aims to investigate the behavior of exchange rate in the BRICS countries, with an emphasis on exchange rate passthrough and exchange rate determination empirical models. By applying the ARDL Bounds Testing Approach Methodology, from January 2005 to December 2019. Our main results show that: i) there is a long run cointegration among the variables analyzed for all estimated models; ii) there is a very slow speed of adjustment towards the long run equilibrium; iii) there is evidence of exchange rate passthrough to inflation mainly in the long run, but not as strong as before; iv) there is no evidence of exchange rate overshooting; v) international reserve accumulation can be considered a partial explanation for the evidence of no exchange rate overshooting.

Impact valuation of droughts in soybean and maize production: the case of Argentina

PurposeIn Argentina, soy and maize represent 28% of the total country exports, affecting the balance of payments, international reserves accumulation and sovereign credit risk. In the past 10 years, three extreme and moderate droughts have affected the agricultural areas, causing significant losses in soybean and maize production. This study aims to estimate the economic impact generated by different drought levels for soy and maize production areas through a financial perspective that allows the estimation of the cash flow and income losses.Design/methodology/approachBy analyzing the extreme deviations in yields during dry periods, the losses generated by droughts were valuated among 183 departments nationwide.FindingsThe aggregated results indicated a total loss of US$24.170m, representing 57.45% of the international reserves of the Argentinean Central Bank in 2021. This estimate shows the magnitude of the climate impact on the Argentinean economy, indicating that severe droughts have macroeconomic impacts, with the external sector as the main transmission channel in an economy with historic restrictions on the balance of payments, international reserve accumulation and sovereign credit risk.Originality/valueThis study analyses the macroeconomic impact of drought on Argentinean soybean and maize production.

Expected impact of the bankruptcy of leading foreign banks on the banking system of Ukraine

The purpose of the article is to study the problems associated with the possible unfolding of the banking crisis in the USA and European countries, the content of state regulatory measures aimed at ensuring the financial stability of Ukrainian banks, which will be implemented consecutively from February 2022, the justification of additional, most urgent measures aimed at overcoming existing problems in the country’s banking system. General scientific and special methods are used: analysis, synthesis, grouping, description, comparison, theoretical generalization and abstract-logical. In the course of the research, it was concluded that the bankruptcy of some leading foreign banks should not have a significant negative impact on the banking sector of the Ukrainian economy. The article also discloses the content of state regulatory measures aimed at ensuring the financial stability of Ukrainian banks, which include the implementation of full (regardless of the amount and currency) state guarantee of bank deposits of individuals, providing banks with the required amount of refinancing, a radical increase in the discount rate, active accumulation of international reserves, withdrawal of problem banks from the market, activation of the use of norms of mandatory reservation of funds raised by banks, reduction of the rate on overnight deposit certificates, activation of the work of the Financial Stability Council. The positive consequences of the implementation of a set of measures to support the banking system of Ukraine were determined, in particular: a decrease in inflation rates, strengthening of the hryvnia exchange rate, preservation of profitability of the banking system, gradual restoration of bank capitalization. Problems that require the adoption of additional regulatory measures by the state are highlighted, namely the increase in the share of problem loans and the actual suspension of credit activities of banks. A number of measures are proposed within the framework of improving the current monetary policy of Ukraine: development of the mechanism of “emergency” refinancing of banks in case of rapid spread of crisis phenomena; unconditional adherence to the policy of “expensive money”; limitation of emission and money supply growth rates; restoration of the practice of compulsory sale of a part of the foreign currency earnings of exporters; ensuring further “fine-tuning” of the current method of mandatory reservation of the funds involved; settlement of the “new” NPL management procedure; creation of a specialized state institution for the management of problem assets to accept NPL portfolios of state banks on the balance sheet. The results of the research can be used at the level of the National Bank and the government in the process of forming urgent measures in the field of monetary policy implementation.
 JEL classіfіcatіon: E31, E40, E42, E50, E52, F31, F35

What Drives Asian International Reserves Accumulation in the Post-financial Crisis of 1997-98

Global reserves accumulation experienced impressive gains following the late 1990s Asian financial crisis that undermined not only the Asian economies but also the world. Since then, only 49 Asian countries are contributing more than 60% of global hoarding and this trend has been considered from various insights of the international policy agenda. But the logic behind this enormous accumulation is still a matter of serious debate among researchers which is examined in this paper. The empirical estimation based on the unbalanced panel of 49 Asian countries from the period of 1999-2021 confirms precautionary motive as the best illustrator of holding reserves. Asian countries hold reserves as a safeguard against temporary external imbalances and uncertainty in the balance of payment. Against the popular myth that export, or GDP growth has no effect on reserve accumulation. However, exchange rate stability has some effect. Social Science Review, Vol. 40(1), Jun 2023 Page 203-221

International Reserve Accumulation: Balancing Private Inflows with Public Outflows

International Reserve Accumulation: Balancing Private Inflows with Public Outflows

Determinants of International Reserves Among Organisation of Petroleum Exporting Countries (OPEC)

Member countries of the Organisation of Petroleum Exporting Countries (OPEC) are always in the news regarding the prices and supply of crude oil to the international market. One of the economic reasons for this is liquidity and the desire to accumulate international reserves by the respective countries. This paper examined the determinants of international reserves among the cartel against the backdrop of the motives for keeping reserves. With data from 2005 to 2018, the adopted variables that were tested with the system of generalised methods of moments (Sy‑GMM) are inflation, exchange rates, oil prices, crude oil dependence, economic crises and others. The results and outputs show that inflation was negatively impactful externally and internally, while FDI inflows recorded negative significance. Economic crises and economic openness were positively significant, while oil prices and exchange rates were not significant determinants of international reserves accumulation. The paper recommends the maximisation of opportunities available by members during economic crises to accumulate reserves that will enable them to diversify from dependence on crude oil exports to include other products and a higher level of openness to open the economy up for competition to make the economies stronger.

International cooperation in foreign reserve policies in the presence of competitive hoarding

AbstractThis article analyzes the international reserve accumulation behavior of emerging and developing economies facing “keeping‐up‐with‐the‐Joneses” externalities. I first document empirical evidence for a significant Joneses effect, which has been particularly persistent in Asia and Latin America since the late 1990s. This peer‐pressure motive could encourage excess reserve hoarding, providing a rationale for cooperation. I then develop a theoretical model of the borrowing economy featuring the Joneses effect and the interdependence between reserves and domestic capital investment. Numerical results show that international cooperation can effectively internalize negative externalities associated with competitive reserve hoarding and induce welfare‐enhancing resource allocations.

Improving the theoretical foundations of conducting monetary policy

The article shows the Monetary policy goals traditionally include price stability, founded economic growth, full employment, smoothing business cycles, preventing financial crises, and stabilizing interest rates and exchange rates. At the present stage, the currencies exchange rate is actively supported through operations in the foreign exchange market, which is confirmed by the large-scale accumulation of international reserves of the Bank of Uzbekistan. In the absence of sterilization mechanisms, such a practice inevitably leads to inflation, since a huge mass of soums flows into the market, the growth of which in many respects exceeds the growth of the economy as a whole.

The role of international reserves on real exchange rate: a panel data analysis

This article analyzes whether the accumulation of international reserves affects real exchange rates for a set of 57 economies. Panel ARDL estimations, for annual data from 1994 to 2017, show that higher (lower) levels of international reserves cause appreciation (depreciation) of exchange rate and reduce (increase) its volatility, in the long run. As for the error-correction related to deviations from the long run, short run adjustments in exchange rate volatility occur at a much faster rate than corrections in the exchange rate level. The Balassa-Samuelson effect, inflation and inflation differential also play significant roles, whereas monetary independence is partially important.

EDUCATIONAL FACTORS AS DETERMINANT OF INTERNATIONAL RESERVES ACCUMULATION IN ORGANISATION OF PETROLEUM EXPORTING COUNTRIES

Despite huge petroleum revenues with high development needs, the growth of international reserves in OPEC countries has been negligible. This study examined the impact of educational factors using different levels of literacy in stimulating the macroeconomic determinants of international reserves in OPEC member countries using data from 2008 to 2018 from World Bank Development Indicators for 15 member countries. The study used a dynamic panel model, and the data were analyzed using System of Generalized Method of Moments (SGMM). The results show that educational levels such as adult literacy, youth literacy, tertiary and secondary enrollment mitigate the negative impact of the exchange rate and stimulate the impact of crude oil prices, while tertiary enrollment stimulates the impact of foreign direct investment and reduces the negative impact of economic crises. Overall, youth literacy was most significant for these economies, while economic crises were significantly positive at all levels as a major determinant of international reserve accumulation. Therefore, it was concluded that education contributes to the economy's accumulation of more reserves. In particular, the study recommended that national governments provide adequate funding for the education sector to improve the quality of education at the junior and high school levels in order to provide adequate knowledge and skills to enhance foreign investment.

The peso problem and dollar hegemony under inflation targeting

This article examines the influence of US monetary policy on Mexico’s exchange rate (peso/dollar) and monetary policy. It shows that the recent reduced volatility of Mexico’s exchange rate is a consequence of defensive policies undertaken by Mexico’s central bank to avoid sudden capital reversals and speculative attacks, usually associated with destabilizing speculative behavior. To test that hypothesis, the paper examines the effect of the accumulation of international reserves and exchange-rate variations on the Mexico–US interest-rate gap. The authors’ findings confirm that international reserves permit the central bank to maneuver the exchange rate and its inflation target. Furthermore, the paper provides an estimated Taylor rule for Mexico, including the US interest rate. The estimation reveals that Mexico’s monetary policy is not independent of US monetary policy. Mexico faces a liquidity trap at a higher interest rate than the United States. Whereas the United States faces a trap at the zero lower bound, Mexico encounters monetary policy ineffectiveness at an interest rate of 3.5 percent.

Макроекономічний аналіз ефективності регулювання економіки України: ретроспектива та сучасний фінансово-економічний стан

With the beginning of Russia’s large-scale war against Ukraine on February 24, 2022, Ukraine’s economy suffered shock influences, which on the part of the main public administration bodies caused an urgent need to respond promptly to the sharp changes and dynamics of events that have since unfolded. In addition, it was necessary to understand why and for what reasons the financial-economic system of Ukraine reacted in the way it behaved. Thus, the presented study is aimed at defining and assessing the effectiveness of the implementation of the previous systemic policy along with analyzing the operational actions of the National Bank of Ukraine as the main financial-economic regulator in the conditions of belligerency with regard to the country’s economy. Such an analysis provides an opportunity to further adjust the tactics of managing the financial-economic processes, taking into account the identified shortcomings in the implementation of decisions of previous periods. The research uses a comprehensive approach to macroeconomic analysis, methods of structural analysis and analysis of the dynamics of financial-economic indicators in retrospection. The research is built in two stages. At the first stage, with the help of retrospective financial-economic analysis methods, an assessment of the efficiency of the implementation of the defined Strategy for the development of financial markets in Ukraine for the period from 2016 to 2021 was carried out. At the second stage of the research, the actions of the Central bank were recorded, which led to the stabilization of the macroeconomic crisis in the country, the main directions of operational regulation during martial law in Ukraine were determined, their efficiency was assessed. A retrospective analysis of the actions of the National Bank of Ukraine in 2016-2022 showed that during this period the following important results were achieved in ensuring both financial and price stability, also the stability of the monetary unit: the monetary regime was used quite successfully in conducting inflation targeting, the standards of commercial banks were increased, a program for the accumulation of international reserves was carried out, and the exchange rate was regulated in order to ensure its growing. The assessment of the actions of the National Bank of Ukraine during the period of martial law after February 24, 2022 showed that the following measures of operational regulation were carried out: a number of external and internal incoming and outgoing financial barriers were applied, the accounting rate was regulated, special measures were constantly taken to ensure the financial-economic reserves of the financial system of Ukraine, new mechanisms of financial levers for the credit situation were developed. Further on, it would be advisable to consider the efficiency of regulating the financial-economic situation in a more distant period in order to be able to assess the correctness and fallacy of the decisions taken and adjust the regulator’s actions to maintain a stable state of the economy and further gradually exit from the crisis status. This analysis allows society to apprehend the complexity, consistency of actions of the central economic regulatory bodies, to understand the consequences and expediency of such actions. The presented research is original and comprehensive, touching on all macroeconomic aspects of the activities of the main financial regulator of Ukraine, its influence on the financial-economic situation of the country.

Determinants of International Reserves in Nigeria

Over the past decades, nations have accumulated international reserves to leverage foreign counterparts or protect themselves against external shocks resulting from integration. The factors identified by researchers as contributing to international reserve accumulation, however, have primarily been market factors. This study sets out to identify some distinct factors of the Nigerian economy. This is accomplished using annual data from 1970 to 2016. Several econometric methods, including the unit root test and Granger causality, were applied to test two hypotheses. The results showed substantial long-run correlations between the variables examined. Thus, the Error Correction Methodology (ECM) was used to investigate short-term and long-term relationships. Findings reveal that the accumulation of foreign reserves was significantly influenced in the long run only by aggregate exports EXPT and trade openness OPN since both variables were statistically significant at 5 percent. At the specified beak-point, there was an important structural change. Finally, Nigeria’s level of international reserves was significantly impacted by the quality of its institutions. Thus, the study recommends that policymakers maintain the current exchange rate regime in order to ensure world competitiveness. The research also suggested that the government take steps to improve and build strong institutions in order to promote transparency and accountability.

Do oil endowment and productivity matter for accumulation of international reserves?

Motivated by the observation that a country tends to have more official foreign reserves if its crude oil endowment is large (small) but its productivity is low (high), we develop and estimate a dynamic stochastic optimization model to show that precautionary incentives against oil price shocks can account for a substantial part of the effects of productivity and oil endowment on a country’s foreign reserves. We demonstrate how oil price shocks are absorbed by changes in foreign reserves which, in turn, leads to less variation in aggregate consumption. Along with productivity and oil endowment, we also consider as determinants of foreign reserves conventional variables such as trade-to-GDP ratio and capital openness. Overall, our results suggest that ignoring productivity and oil endowment may lead to large bias in the estimates of some conventional determinants of a country’s foreign reserves.

Reserve accumulation, inflation, and moral hazard: Evidence from a natural experiment

AbstractThis study tests whether international reserve accumulation is inflationary because of moral hazard and incentive effects. We use the 2009 allocation of Special Drawing Rights (SDR) as a natural experiment to trace the effect of an exogenous nonmonetary shock on International Monetary Fund members' reserve holdings. In countries that received large SDR allocations, inflation was about half a percentage point higher in the 2 years following the allocation, controlling for other standard determinants. This effect is commensurate with the size of these countries' discretionary fiscal deficits. This result is consistent with the hypothesis that reserve accumulation may be inflationary because of incentive effects.

Islamic Republic of Mauritania

The COVID-19 pandemic is having a severe human, economic, and social impact on Mauritania. The economy is estimated to have contracted by about 2 percent in 2020 and the crisis generated large financing needs. The authorities responded swiftly to mitigate the impact of the pandemic while international partners provided grants, loans, and debt service suspension. This, compounded by higher commodity exports (iron ore and gold) and some delays in emergency spending, resulted in unexpected fiscal surpluses and an accumulation of international reserves, which may now be used to support the recovery in 2021–22. The outlook remains highly uncertain and dependent on volatile commodity markets, with sizable downside risks in case new waves of the pandemic spill over into Mauritania.

Accounting for foreign exchange operations and its implications for monetary policy implementation: international experience and the case of Brazil

Central banks play a unique role in the payment systems and in the issuance of their currencies. Therefore, they cannot become illiquid. However, persistent losses can undermine their credibility. The law 11,803 diminished the possibility of negative results at the Brazilian Central Bank (BCB) by isolating and transferring its foreign exchange results to the Treasury. It also created an asymmetrical distribution scheme that automatically supplies the BCB with the necessary bonds to execute its liquidity management operations and assured the accounting hedge of the foreign exchange swaps, enhancing its autonomy. The main drawbacks of this legislation are the lack of transparency and the increased frequency of transfers between the BCB and the Treasury. However, the expansion of the reverse repos is tied to the accumulation of international reserves and to the interest rate differential between foreign assets and local liabilities and would have happened regardless of the monetary policy instrument.

Restrictions on Capital Flows and International Financial Institutions’ Support

n the wake of the 2008 financial crisis, international financial institutions have changed their views on the benefits of capital account liberalization and the management of capital flows. The International Monetary Fund (IMF) began to publicly express support for what have traditionally been referred to as “capital controls.” The impacts of restrictions on capital flows have, unfortunately, still not been established, and capital controls create distortions if they remain in place indefinitely. The present study uses quarterly data on capital controls in 25 emerging economies over the period between 2000 and 2016. Through an examination of a panel vector autoregressive (PVAR) with variance decomposition and impulse-response functions analysis, the study provides further evidence of some domestic effects of restrictions on capital flows. The results show that restrictions were more effective following the 2008 financial crisis and allowed for more monetary policy autonomy and exchange rate stability. Unexpectedly, the findings do not show any significant impact on international reserves accumulation. The study highlights the necessity of following the international financial organizations’ guidelines to well manage external capital flows and to better coordinate macroeconomic policies in the hope of finding an optimal policy mix.