Title: International reserves holding and the political risk: evidence from selected emerging economies

Authors: Siti Nurazira Mohd Daud; Abd Halim Ahmad

Addresses: Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, 71800 Nilai, Negeri Sembilan, Malaysia ' College of Business, Universiti Utara Malaysia, 06010 Sintok, Kedah Darul Aman, Malaysia

Abstract: The objective of this paper is to investigate the relationship between financial and economic uncertainty (risk) and the demand for international reserves. In addition, the association between this relationship and the political risk condition is further analysed for selected emerging economies. By using panels of 20 emerging countries, the empirical results show that the decision by the emerging economies to hold international reserves is largely dependent on the fluctuations in the financial risk indicators. In addition, the interdependency between the demand reserves function and the type of financial risk indicator also varies across countries' political conditions.

Keywords: international reserves; self-insurance motivation; country risk; political risk; emerging economies; financial uncertainty; economic uncertainty; risk indicators.

DOI: 10.1504/GBER.2014.063077

Global Business and Economics Review, 2014 Vol.16 No.3, pp.332 - 348

Received: 01 Aug 2012
Accepted: 04 Apr 2013
Published online: 29 Jul 2014 *

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