The International Reserves Issue in the EMU

Hansen, Jørgen; King, Roswitha; Kvedaras, Virmantas
February 2011
Open Economies Review;Feb2011, Vol. 22 Issue 1, p143
Academic Journal
This paper examines the effects of the Economic and Monetary Union on demand for foreign reserves. The traditional theory on demand for international reserves assigns a pivotal role to imports. However, in a currency union part of imports are settled in the common currency, leaving no incentive for keeping foreign reserves. Moreover, the pooling of the demand for reserves in the currency union and an increasing role of a currency as an international reserve currency may also influence, among other things, the union demand for reserves. Based on estimated demand functions for reserves it is shown that the Economic and Monetary Union has reduced the demand for reserves substantially. It is argued that an enlargement with new member countries of the European Union will result in further savings of reserves. A simple calculation at the end of the paper illustrates the welfare gain associated with the reduced need of reserves in the Economic and Monetary Union.


Related Articles

  • Interest Rate Transmission Mechanism of Monetary Policy in the Selected EMU Candidate Countries. Mirdala, Rajmund // Panoeconomicus;Sep2009, Vol. 56 Issue 3, p359 

    The stable macroeconomic environment, as one of the primary objectives of the Visegrad countries in the 1990s, was partially supported by the exchange rate policy. Fixed exchange rate systems within gradually widen bands (Czech Republic, Slovak Republic) and crawling peg system (Hungary, Poland)...

  • Devaluation hits Cairo imports.  // MEED: Middle East Economic Digest;3/14/2003, Vol. 47 Issue 11, p29 

    Reports on the decision of the government of Egypt to freeze state imports as of March 2003. Reason for the decision; Value of the local currency; Efforts made by the Central Bank of Egypt to bridge the exchange rate gap.

  • Taiwan: Export Orders Foreshadow Further Agony.  // Emerging Markets Monitor;3/2/2009, Vol. 14 Issue 45, p8 

    The article reports on the impact of the slowdown in Taiwan's export order and industrial production on domestic demand and investment in the country. Export orders declined by 41.7 percent year-on-year while industrial production dropped by 43.1 percent year-on-year in January 2009. Importers...

  • SAFE Invests in British BP.  // EmergingMarketsNOW;4/17/2008, p9 

    The article reports that the State Administration of Foreign Exchange (SAFE), an arm of the Chinese central bank that manages the country's foreign exchange reserves, has acquired about 1 percent stake in British Petroleum (BP), one of the world's leading oil companies, for about $2 billion....

  • Austrian Central Bank on Hungary FX debt relief.  // Hungary A.M.;7/ 8/2014, p1 

    The article reports that the Austrian Central Bank is not expecting costs to banks in Austria to exceed 2011 levels despite the foreign exchange debt package approved by Hungary, and also mentions a warning by the central bank on risks.

  • India: Rupee Heading To INR46.00/US$?  // Emerging Markets Monitor;5/26/2008, Vol. 14 Issue 8, p9 

    The article looks at the impact on the Indian rupee of net foreign selling of Indian stocks exposing a current account deficit that is exacerbated by the ascent of oil prices. The current account shortfall was hindered by net portfolio inflows of $17.36 billion in 2007. It is predicted that the...

  • MARKET MOVERS.  // Emerging Markets Monitor;9/12/2005, Vol. 11 Issue 22, p1 

    Presents updates on the fixed income, foreign exchange and equities in Asia, Europe, Middle East, Africa and Latin America as of September 12, 2005. Decline in the price of Brent Crude oil; Allegations against Ukrainian President Viktor Yushchenko which prompted him to dismiss his entire...

  • Local stocks hit new record high.  // Filipino Reporter;7/6/2012, Vol. 40 Issue 31, p14 

    The article reports that local stocks reached a new record-high in July 2012 as regional sentiment turned bullish on expectations that central banks in Europe and the U.S. will implement measures to bolster their troubled economies.

  • Investment and finance. Liedeker, Michele Mack // China Business Review;Jan/Feb99, Vol. 26 Issue 1, p4 

    Shows that 60 percent of companies engaging in investment-and-finance-related activities in China report problems as a result of the foreign exchange measures implemented by the State Administration of Foreign Exchange and the People's Bank of China. Percentage of the firms whose cash flow...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics