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Foreign reserve holdings: an extended study through risk-inspired motives

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  • Shijaku, Gerti
  • Dushku, Elona

Abstract

This paper examines the demand for foreign reserve holdings for the Albanian small open economy. The model is estimated through the Vector Error Correction Model approach. Results provide supportive evidence that reserve accumulation is more sensitive to precautionary motives rather than mercantilist ones. Other results reconfirm that current account patterns and fiscal imbalances are the main driving forces behind reserve holding. By contrast, reserve was yet again found less sensitive regarding the opportunity cost and mercantilist motives.

Suggested Citation

  • Shijaku, Gerti & Dushku, Elona, 2017. "Foreign reserve holdings: an extended study through risk-inspired motives," MPRA Paper 79199, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:79199
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Foreign reserve holdings; trade openness; short-term capital movements; VECM;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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