The nonlinear impact of institutional quality on international reserves: International evidence
Document Type
Article
Publication Date
10-1-2021
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.
Keywords
International reserves, Institutional quality, System GMM, Marginal effect, Nonlinearity
Divisions
economics
Funders
USM short-term research grant [304/PSOSIAL/6315310]
Publication Title
Journal of International Commerce Economics and Policy
Volume
12
Issue
03
Publisher
World Scientific Publishing