Estimating Foreign Exchange Reserve Adequacy
Accumulating foreign exchange reserves, despite their cost and their impacts on other macroeconomics variables, provides some benefits. This paper models such foreign exchange reserves. To measure the adequacy of foreign exchange reserves for import, it uses total reserves-to-import ratio (TRM). The...
| Main Author: | |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Prasetiya Mulya Publishing
2013-04-01
|
| Series: | International Research Journal of Business Studies |
| Subjects: | |
| Online Access: | http://www.irjbs.com/index.php/jurnalirjbs/article/view/94/94 |
| _version_ | 1811264698480328704 |
|---|---|
| author | Abdul Hakim |
| author_facet | Abdul Hakim |
| author_sort | Abdul Hakim |
| collection | DOAJ |
| description | Accumulating foreign exchange reserves, despite their cost and their impacts on other macroeconomics variables, provides some benefits. This paper models such foreign exchange reserves. To measure the adequacy of foreign exchange reserves for import, it uses total reserves-to-import ratio (TRM). The chosen independent variables are gross domestic product growth, exchange rates, opportunity cost, and a dummy variable separating the pre and post 1997 Asian financial crisis. To estimate the risky TRM value, this paper uses conditional Value-at-Risk (VaR), with the help of Glosten-Jagannathan-Runkle (GJR) model to estimate the conditional volatility. The results suggest that all independent variables significantly influence TRM. They also suggest that the short and long run volatilities are evident, with the additional evidence of asymmetric effects of negative and positive past shocks. The VaR, which are calculated assuming both normal and t distributions, provide similar results, namely violations in 2005 and 2008. |
| first_indexed | 2024-04-12T20:09:02Z |
| format | Article |
| id | doaj.art-3c0b79810eb946a487375caf6f05368d |
| institution | Directory Open Access Journal |
| issn | 2089-6271 2338-4565 |
| language | English |
| last_indexed | 2024-04-12T20:09:02Z |
| publishDate | 2013-04-01 |
| publisher | Prasetiya Mulya Publishing |
| record_format | Article |
| series | International Research Journal of Business Studies |
| spelling | doaj.art-3c0b79810eb946a487375caf6f05368d2022-12-22T03:18:18ZengPrasetiya Mulya PublishingInternational Research Journal of Business Studies2089-62712338-45652013-04-01616372Estimating Foreign Exchange Reserve AdequacyAbdul Hakim0Universitas Islam IndonesiaAccumulating foreign exchange reserves, despite their cost and their impacts on other macroeconomics variables, provides some benefits. This paper models such foreign exchange reserves. To measure the adequacy of foreign exchange reserves for import, it uses total reserves-to-import ratio (TRM). The chosen independent variables are gross domestic product growth, exchange rates, opportunity cost, and a dummy variable separating the pre and post 1997 Asian financial crisis. To estimate the risky TRM value, this paper uses conditional Value-at-Risk (VaR), with the help of Glosten-Jagannathan-Runkle (GJR) model to estimate the conditional volatility. The results suggest that all independent variables significantly influence TRM. They also suggest that the short and long run volatilities are evident, with the additional evidence of asymmetric effects of negative and positive past shocks. The VaR, which are calculated assuming both normal and t distributions, provide similar results, namely violations in 2005 and 2008.http://www.irjbs.com/index.php/jurnalirjbs/article/view/94/94Foreign exchange reserveGJRValue-at-Riskreserves-to-import ratio |
| spellingShingle | Abdul Hakim Estimating Foreign Exchange Reserve Adequacy International Research Journal of Business Studies Foreign exchange reserve GJR Value-at-Risk reserves-to-import ratio |
| title | Estimating Foreign Exchange Reserve Adequacy |
| title_full | Estimating Foreign Exchange Reserve Adequacy |
| title_fullStr | Estimating Foreign Exchange Reserve Adequacy |
| title_full_unstemmed | Estimating Foreign Exchange Reserve Adequacy |
| title_short | Estimating Foreign Exchange Reserve Adequacy |
| title_sort | estimating foreign exchange reserve adequacy |
| topic | Foreign exchange reserve GJR Value-at-Risk reserves-to-import ratio |
| url | http://www.irjbs.com/index.php/jurnalirjbs/article/view/94/94 |
| work_keys_str_mv | AT abdulhakim estimatingforeignexchangereserveadequacy |