International Reserve Holdings in ASEAN5 Economies

Abstract

This paper examines international reserve holdings in five ASEAN economies during the period of 1970-2005 using the autoregressive distributed lag (ARDL) bounds testing approach proposed by Pesaran, Shin, and Smith (2001). These countries had increased their international reserve holdings after the 1997 Asian financial crisis. The majority of these countries had also experienced consistent current account surplus during the same period. Thus, the present study attempts to investigate the existence of long run relationship between reserve holdings and the current account. The empirical results indicate that current account surplus leads to the rise in international reserve holdings in Indonesia, Malaysia, and Singapore.