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The Nonlinear Impact of Institutional Quality on International Reserves: International Evidence

The Nonlinear Impact of Institutional Quality on International Reserves: International Evidence This paper investigates the nonlinear effect of institutional quality on the holding of international reserves by applying the two-step system generalized method of moments on data consisting of 67 countries from 1996 to 2016. The hypothesis is that the association between institutional quality and international reserves has an inverted U pattern. The coefficient sign of the institutional quality and its square term supports the hypothesis. Besides, the marginal effects suggest that the higher the institutional quality index, the lower the demand for reserves. The outputs indicate the importance of good institutional quality in reducing the overdependence on international reserves. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of International Commerce, Economics and Policy World Scientific Publishing Company

The Nonlinear Impact of Institutional Quality on International Reserves: International Evidence

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Publisher
World Scientific Publishing Company
ISSN
1793-9933
eISSN
1793-9941
DOI
10.1142/S1793993321500149
Publisher site
See Article on Publisher Site

Abstract

This paper investigates the nonlinear effect of institutional quality on the holding of international reserves by applying the two-step system generalized method of moments on data consisting of 67 countries from 1996 to 2016. The hypothesis is that the association between institutional quality and international reserves has an inverted U pattern. The coefficient sign of the institutional quality and its square term supports the hypothesis. Besides, the marginal effects suggest that the higher the institutional quality index, the lower the demand for reserves. The outputs indicate the importance of good institutional quality in reducing the overdependence on international reserves.

Journal

Journal of International Commerce, Economics and PolicyWorld Scientific Publishing Company

Published: Oct 8, 2021

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