Foreign exchange inflows in emerging markets: how much are they sterilised?
As some emerging market economies have amassed large quantities of foreign exchange reserves, concern has arisen over the sterilisation of the domestic money stock from these flows. Existing studies focus mostly on narrow (reserve) money, and estimate a high degree of sterilisation. Empirical work o...
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| Format: | Article |
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Wiley
2016
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| Online Access: | https://eprints.nottingham.ac.uk/32771/ |
| _version_ | 1848794486005563392 |
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| author | Bleaney, Michael Devadas, Sharmila |
| author_facet | Bleaney, Michael Devadas, Sharmila |
| author_sort | Bleaney, Michael |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | As some emerging market economies have amassed large quantities of foreign exchange reserves, concern has arisen over the sterilisation of the domestic money stock from these flows. Existing studies focus mostly on narrow (reserve) money, and estimate a high degree of sterilisation. Empirical work on the long-run relationship between money and prices emphasises broad money, yet the long-run effect of foreign exchange inflows on broad money has been almost entirely ignored. Using a sample of quarterly data from 28 countries over the period 1990-2010, it is shown that broad money is sterilised to a significantly smaller degree than reserve money, raising concerns about the implications for financial imbalances and inflation. This pattern of sterilisation is not confined to any particular group of countries and is unrelated to the nature of the flows (e.g. current account versus capital account surpluses). Sterilisation rates have increased in Asia during the recent period of persistent accumulation of foreign exchange reserves.
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| first_indexed | 2025-11-14T19:16:57Z |
| format | Article |
| id | nottingham-32771 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:16:57Z |
| publishDate | 2016 |
| publisher | Wiley |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-327712020-05-04T17:35:22Z https://eprints.nottingham.ac.uk/32771/ Foreign exchange inflows in emerging markets: how much are they sterilised? Bleaney, Michael Devadas, Sharmila As some emerging market economies have amassed large quantities of foreign exchange reserves, concern has arisen over the sterilisation of the domestic money stock from these flows. Existing studies focus mostly on narrow (reserve) money, and estimate a high degree of sterilisation. Empirical work on the long-run relationship between money and prices emphasises broad money, yet the long-run effect of foreign exchange inflows on broad money has been almost entirely ignored. Using a sample of quarterly data from 28 countries over the period 1990-2010, it is shown that broad money is sterilised to a significantly smaller degree than reserve money, raising concerns about the implications for financial imbalances and inflation. This pattern of sterilisation is not confined to any particular group of countries and is unrelated to the nature of the flows (e.g. current account versus capital account surpluses). Sterilisation rates have increased in Asia during the recent period of persistent accumulation of foreign exchange reserves. Keywords: Wiley 2016-02-26 Article PeerReviewed Bleaney, Michael and Devadas, Sharmila (2016) Foreign exchange inflows in emerging markets: how much are they sterilised? Manchester School . ISSN 1467-9957 foreign exchange intervention money sterilisation emerging markets http://onlinelibrary.wiley.com/doi/10.1111/manc.12144/abstract? doi:10.1111/manc.12144 doi:10.1111/manc.12144 |
| spellingShingle | foreign exchange intervention money sterilisation emerging markets Bleaney, Michael Devadas, Sharmila Foreign exchange inflows in emerging markets: how much are they sterilised? |
| title | Foreign exchange inflows in emerging markets: how much are they sterilised? |
| title_full | Foreign exchange inflows in emerging markets: how much are they sterilised? |
| title_fullStr | Foreign exchange inflows in emerging markets: how much are they sterilised? |
| title_full_unstemmed | Foreign exchange inflows in emerging markets: how much are they sterilised? |
| title_short | Foreign exchange inflows in emerging markets: how much are they sterilised? |
| title_sort | foreign exchange inflows in emerging markets: how much are they sterilised? |
| topic | foreign exchange intervention money sterilisation emerging markets |
| url | https://eprints.nottingham.ac.uk/32771/ https://eprints.nottingham.ac.uk/32771/ https://eprints.nottingham.ac.uk/32771/ |