The Demand for International Reserves and Exchange Rate Adjustments

The Case of LDCs, 1964-1972

Bibliographic Data

ID9724541
AuthorsShane Edwards (0000-0002-3249-9702, corresponding author), Sebastián Edwards
Year1983
Volume50
Issue199
Pages269
Publication date1983-08-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueEconomica (JOURNAL)
Journal identifiersISSN: 0013-0427 • E-ISSN: 1468-0335
PublisherJSTOR (PUBLISHER)
DOI10.2307/2553969
OpenAlexW3121970857
LanguageEN
Citations received4
References cited4

In this paper the relationship between the demand for international reserves and exchange rate adjustments is empirically investigated for agroup of LDC's. It is shown that countries that have maintained a fixed exchange rate for a long period of time have a different demand function than countries that have occasionally used exchange rate adjustments for correcting payments imbalances. The dynamics of the adjustment for both groupsof countries are also analyzed. The results show that while both groups tend to eliminate reserve disequilibria fast, those countries that have maintained a fixed rate tend to do it more slowly than countries that have occasionally devalued their currency. It Is also shown that the year prior to a devaluation, international reserves have been, on average, 30% below their short-run desired level. These results are important since they indicate that not all LDC's should be aggregated for prediction purposes. The results also have implications for the analysis of the adequacy of international reserves in less developed countries

Balance of payments · Currency · Demand curve · Devaluation · Developing country · Economics · Exchange rate · Fixed exchange rates · International economics · Microeconomics · Monetary economics · Global Financial Crisis and Policies · Global trade and economics · Monetary Policy and Economic Impact

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