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The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves

This paper investigates the short-run and long-run effects of financial integration on the dynamics between monetary independence and foreign exchange reserves using a GMM system estimation involving two-year non-overlapping average data (2000-2011) from 114 countries. The results indicate that the...

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Prif Awduron: Law, Chee Hong, Tee, Chee Lip, Lau, Wei Theng
Fformat: Erthygl
Iaith:English
Cyhoeddwyd: Routledge 2019
Mynediad Ar-lein:http://psasir.upm.edu.my/id/eprint/82505/1/The%20impacts%20of%20financial%20integration%20on%20the%20linkages%20between%20monetary%20independence%20and%20foreign%20exchange%20reserves.pdf
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id oai:psasir.upm.edu.my:82505
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spelling oai:psasir.upm.edu.my:82505 http://psasir.upm.edu.my/id/eprint/82505/ The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves Law, Chee Hong Tee, Chee Lip Lau, Wei Theng This paper investigates the short-run and long-run effects of financial integration on the dynamics between monetary independence and foreign exchange reserves using a GMM system estimation involving two-year non-overlapping average data (2000-2011) from 114 countries. The results indicate that the effect of foreign exchange reserves on the monetary independence is intensified by the level of financial integration. This suggests a positive spill over effect from the financial integration to the monetary policy independence. Besides, a positive implication of financial integration on monetary independence could be established when the foreign exchange reserves is at the maximum level. In addition, the comparisons between the mean of foreign exchange reserves and the threshold levels of foreign exchange reserves that neutralise the impact of financial integration indicate that on average, the foreign exchange reserves are sufficient to offset the effect of financial integration. A stable exchange rate will undermine the positive impact of foreign exchange reserves on monetary independence. Finally, the long-run and short-run impacts occur in the same direction. This paper ends with some policy implications and suggestions for future research. Routledge 2019 Article PeerReviewed text en http://psasir.upm.edu.my/id/eprint/82505/1/The%20impacts%20of%20financial%20integration%20on%20the%20linkages%20between%20monetary%20independence%20and%20foreign%20exchange%20reserves.pdf Law, Chee Hong and Tee, Chee Lip and Lau, Wei Theng (2019) The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves. International Economic Journal, 33 (2). pp. 212-235. ISSN 1016-8737; ESSN: 1743-517X https://www.tandfonline.com/doi/abs/10.1080/10168737.2019.1587488?journalCode=riej20 10.1080/10168737.2019.1587488
institution UPM IR
collection UPM IR
language English
description This paper investigates the short-run and long-run effects of financial integration on the dynamics between monetary independence and foreign exchange reserves using a GMM system estimation involving two-year non-overlapping average data (2000-2011) from 114 countries. The results indicate that the effect of foreign exchange reserves on the monetary independence is intensified by the level of financial integration. This suggests a positive spill over effect from the financial integration to the monetary policy independence. Besides, a positive implication of financial integration on monetary independence could be established when the foreign exchange reserves is at the maximum level. In addition, the comparisons between the mean of foreign exchange reserves and the threshold levels of foreign exchange reserves that neutralise the impact of financial integration indicate that on average, the foreign exchange reserves are sufficient to offset the effect of financial integration. A stable exchange rate will undermine the positive impact of foreign exchange reserves on monetary independence. Finally, the long-run and short-run impacts occur in the same direction. This paper ends with some policy implications and suggestions for future research.
format Article
author Law, Chee Hong
Tee, Chee Lip
Lau, Wei Theng
spellingShingle Law, Chee Hong
Tee, Chee Lip
Lau, Wei Theng
The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves
author_facet Law, Chee Hong
Tee, Chee Lip
Lau, Wei Theng
author_sort Law, Chee Hong
title The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves
title_short The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves
title_full The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves
title_fullStr The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves
title_full_unstemmed The impacts of financial integration on the linkages between monetary independence and foreign exchange reserves
title_sort impacts of financial integration on the linkages between monetary independence and foreign exchange reserves
publisher Routledge
publishDate 2019
url http://psasir.upm.edu.my/id/eprint/82505/1/The%20impacts%20of%20financial%20integration%20on%20the%20linkages%20between%20monetary%20independence%20and%20foreign%20exchange%20reserves.pdf
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score 13.4562235

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