Capital Flows, Financial Integration, and International Reserve Holdings [electronic resource] : The Recent Experience of Emerging Markets and Advanced Economies / Sunil Sharma.
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TextSeries: IMF Working Papers; Working Paper ; No. 07/151Publication details: Washington, D.C. : International Monetary Fund, 2007Description: 1 online resource (36 p.)ISBN: 1451867158 :ISSN: 1018-5941Subject(s): Capital Markets | Net Capital Flows | Net Capital | Panel Data | Sovereign Liquidity | Stockpiling Motive | China, People's Republic of | Hong Kong Special Administrative Region of China | Korea, Republic of | SingaporeAdditional physical formats: Print Version:: Capital Flows, Financial Integration, and International Reserve Holdings : The Recent Experience of Emerging Markets and Advanced EconomiesOnline resources: IMF e-Library | IMF Book Store Abstract: This paper examines the interaction between capital flows and international reserve holdings in the context of increasing financial integration. For emerging markets the sensitivity of reserves to net capital flows was negative in the 1980s, but became positive after the Asian crisis when these countries used net capital flows to build up reserves. For advanced countries, net capital flows had a negative effect on reserves, especially in recent years. Using measures of financial globalization, we also provide evidence that the sensitivity of reserves to net capital flows increased with globalization for emerging markets while it decreased for advanced countries.
This paper examines the interaction between capital flows and international reserve holdings in the context of increasing financial integration. For emerging markets the sensitivity of reserves to net capital flows was negative in the 1980s, but became positive after the Asian crisis when these countries used net capital flows to build up reserves. For advanced countries, net capital flows had a negative effect on reserves, especially in recent years. Using measures of financial globalization, we also provide evidence that the sensitivity of reserves to net capital flows increased with globalization for emerging markets while it decreased for advanced countries.
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