Demand for international reserves: a case for reserve accumulation in Nigeria
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Date
2011-09
Journal Title
Journal ISSN
Volume Title
Publisher
Central Bank of Nigeria
Abstract
This paper examined the determinants of international reserves holding in Nigeria, where a
huge amount of foreign reserves is necessary to ensure good macroeconomic policy and
international credit worthiness. Adopting a dynamic modeling approach combined with
the Mizon-Richard encompassing test, both precautionary and mercantilist motives explain
holding of foreign reserves in Nigeria. Specifically, the current account variability and past
levels of external reserves drive reserve holding in the short run. In the long run, the former
and the money supply are significant determinants. Therefore, enhancement of exports
through support for quality and competitiveness of non-oil exports are key to reserves
management.
Description
Keywords
External reserves, Mercantilist, Cointegration, Buffer stock model
Citation
Bankole, A.S., Olaniyan, O., Gboyega, O. & Shuaibu, M. (2011). Demand for international reserves: a case for reserve accumulation in Nigeria. Economic and Financal Review, 49(3), 71-97.