Out-of-sample analysis of international reserves for emerging economies with a dynamic panel model

Kuk Mo Jung, Ju Hyun Pyun

Research output: Contribution to journalArticlepeer-review

Abstract

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.

Original languageEnglish
Pages (from-to)675-695
Number of pages21
JournalPanoeconomicus
Volume67
Issue number5
DOIs
StatePublished - 2020

Keywords

  • Dynamic panel estimation
  • Emerging economies
  • Foreign exchange reserves
  • Out-of-sample analysis
  • Over-the-counter markets

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