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Examining the interactions of high reserves and weak fundamentals in currency crises

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  • Jie Li

Abstract

This article tackles the issue of reserve adequacy measure by examining the interaction of high reserves and weak fundamentals in crises. The author extends the analysis of Sachs et al. (1996) by adopting on two-step regressions. The first helps find the significant weak fundamental variables. The second determines the appropriate adequate reserve level.

Suggested Citation

  • Jie Li, 2007. "Examining the interactions of high reserves and weak fundamentals in currency crises," Applied Economics Letters, Taylor & Francis Journals, vol. 14(8), pages 617-621.
    • Handle: RePEc:taf:apeclt:v:14:y:2007:i:8:p:617-621
    DOI: 10.1080/13504850500474186
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    References listed on IDEAS

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    1. Jeffrey D. Sachs & Aaron Tornell & Andrés Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 147-216.
    2. Aaron Tornell, 1999. "Common Fundamentals in the Tequila and Asian Crises," Harvard Institute of Economic Research Working Papers 1868, Harvard - Institute of Economic Research.
    3. Thomas D. Willett & Ekniti Nitithanprapas & Isriya Nitithanprapas & Sunil Rongala, 2004. "The Asian Crises Reexamined," Asian Economic Papers, MIT Press, vol. 3(3), pages 32-87.
    4. Takatoshi Ito & Anne O. Krueger, 2001. "Regional and Global Capital Flows: Macroeconomic Causes and Consequences," NBER Books, National Bureau of Economic Research, Inc, number ito_01-1.
    5. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
    6. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 2001. "Fundamental Determinants of the Asian Crisis: The Role of Financial Fragility and External Imbalances," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, pages 11-41, National Bureau of Economic Research, Inc.
    7. Mr. Christian B. Mulder & Mr. Matthieu Bussière, 1999. "External Vulnerability in Emerging Market Economies: How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion," IMF Working Papers 1999/088, International Monetary Fund.
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