This paper assesses the determinants of foreign exchange (FX) reserves in emerging market economies (EMEs). First, it reviews the drivers behind reserve accumulation and the metrics used to evaluate reserve adequacy. We argue that precautionary motives, at least until early 2000s, were the main...

The main goal of this paper is to tackle the empirical issues of the real exchange rate literature by applying recently developed panel cointegration techniques to a structural long-run real exchange rate equation. Using annual data for 67 countries over 1966-97, we find evidence of...

In the wake of the Mexican and Asian currency turmoil, the subject of financial crises have come to the forefront of academic and policy discussions. This paper analyzes the links between banking and currency crises. The authors find that problems in the banking sector typically precede a...

Superficial examination of aggregate gross cross-border capital inflow data suggests that therewas no substitution between portfolio inflows and bank loans in recent years. However, ournovel analysis of disaggregate inflows (both by types of instrument and borrower) showsinteresting...

We propose a model of endogenous, persistent coordination on the international medium of exchange. An asset becomes the dominant international medium because it is widely held, and remains widely held because it is dominant. The country issuing the dominant asset is a net debtor, but earns an...

How do commodity price movements affect sovereign default risk over the long-run? Using a novel dataset covering 41 countries and 42 raw commodities, we take a comprehensive long-run view to shed light on this so far understudied relationship between commodity risk and sovereign risk across 150...

On January 1, 1999 euro became the currency for 11 member states of the European Union. Since then the dollar-euro exchange rate has completed a full turning. Three years of depreciation of the euro followed by three years of appreciation without wild fluctuations asks for an explanation which...

We provide an overview of the recent developments of the literature on the determinants of long-term capital flows, global imbalances, and valuation effects. We present the main stylized facts of the new international financial landscape in which external balance sheets of countries have grown...

In this paper we investigate how income growth rates in one country are affected by growth rates in partner countries, testing for the importance of pairwise country links as well as characteristics of the receiving country (trade and financial open- ness, exchange rate regime, fiscal...

This paper examines the determinants of cross-border flows of U.S. dollar banknotes, using a new panel data set of bilateral flows between the United States and 103 countries from 1990 to 2007. We show that a gravity model explains international flows of currency as well as it explains...