Foreign reserves have been growing rapidly since the mid 1990s in emerging economies hit by Sudde... more Foreign reserves have been growing rapidly since the mid 1990s in emerging economies hit by Sudden Stops (SS). For policy makers and researchers, this large buildup of reserves reflects a new policy that emerging economies have taken to insure against the risk of future SS. In this paper we have argue that the observed increase in foreign exchange holdings in Mexico is the result of more favorable global conditions and NOT a policy shift. We show that the long run demand for international reserves can be replicated using a linear combination of a set of exogenous shocks.We argue that using a set of asset returns and the oil price to investigate the determinants of reserves holdings is both conceptually appealing and quantitatively superior to traditional methods. We show that it is possible to approximate the reserves accumulation process in Mexico as a stationary function of these shocks without an abrupt regime shift after the Tequila crisis. Our results suggest that the rise in r...
China-GCC Trade: A win-win Changing Trade Patterns , 2018
As China became the second largest economy in the world its demand for energy became insatiable. ... more As China became the second largest economy in the world its demand for energy became insatiable. To secure stable supply of oil and gas the Chinese government had shown increasing interest in the Middle East region in general and the Gulf Cooperation Council countries (GCC hereafter) in particular. For their part, GCC countries are also showing an increasing interest for stronger trade relations with China to diversify their trade relations and satisfy their needs for a range of goods and services. Moreover, the location of the GCC region along the “Belt and Road Initiative”, China’s corridor connecting the Far East to Europe and Africa, is expected to put China-GCC trade relations on a new trajectory of higher growth through augmented trade and investment. In this paper, we examine the changes in trade patterns of China and GCC countries, using a panel of trade data for the six GCC countries and China over the period 1996 to 2014. We estimate a gravity model augmented with educatio...
This dissertation addresses the causes of and policy responses to the 1990s current account crise... more This dissertation addresses the causes of and policy responses to the 1990s current account crises. The first chapter explores the relative importance of external shocks as key determinants of the significant increase of foreign reserves accumulated in many emerging market economies, and provides a comprehensive framework to assess the adequacy of reserve holdings. Using the case of Mexico, I find that more than two thirds of the increase in international reserves can be replicated by a linear combination of external shocks, without an abrupt regime shift after the Tequila crisis. I also find that Mexico has historically adopted an appropriate reserves policy, with 1994 being an exception. However, under the current reserves policy, there is a positive probability of a current account crisis in the near future. In chapter Two, I investigate the optimal reserves policy. The analysis predicts an optimal level of reserves in Mexico that is considerably higher than the actual level. Whe...
Foreign reserves have been growing rapidly since the mid 1990s in emerging economies hit by Sudde... more Foreign reserves have been growing rapidly since the mid 1990s in emerging economies hit by Sudden Stops (SS). For policy makers and researchers, this large buildup of reserves reflects a new policy that emerging economies have taken to insure against the risk of future SS. In this paper we have argue that the observed increase in foreign exchange holdings in Mexico is the result of more favorable global conditions and NOT a policy shift. We show that the long run demand for international reserves can be replicated using a linear combination of a set of exogenous shocks.We argue that using a set of asset returns and the oil price to investigate the determinants of reserves holdings is both conceptually appealing and quantitatively superior to traditional methods. We show that it is possible to approximate the reserves accumulation process in Mexico as a stationary function of these shocks without an abrupt regime shift after the Tequila crisis. Our results suggest that the rise in r...
China-GCC Trade: A win-win Changing Trade Patterns , 2018
As China became the second largest economy in the world its demand for energy became insatiable. ... more As China became the second largest economy in the world its demand for energy became insatiable. To secure stable supply of oil and gas the Chinese government had shown increasing interest in the Middle East region in general and the Gulf Cooperation Council countries (GCC hereafter) in particular. For their part, GCC countries are also showing an increasing interest for stronger trade relations with China to diversify their trade relations and satisfy their needs for a range of goods and services. Moreover, the location of the GCC region along the “Belt and Road Initiative”, China’s corridor connecting the Far East to Europe and Africa, is expected to put China-GCC trade relations on a new trajectory of higher growth through augmented trade and investment. In this paper, we examine the changes in trade patterns of China and GCC countries, using a panel of trade data for the six GCC countries and China over the period 1996 to 2014. We estimate a gravity model augmented with educatio...
This dissertation addresses the causes of and policy responses to the 1990s current account crise... more This dissertation addresses the causes of and policy responses to the 1990s current account crises. The first chapter explores the relative importance of external shocks as key determinants of the significant increase of foreign reserves accumulated in many emerging market economies, and provides a comprehensive framework to assess the adequacy of reserve holdings. Using the case of Mexico, I find that more than two thirds of the increase in international reserves can be replicated by a linear combination of external shocks, without an abrupt regime shift after the Tequila crisis. I also find that Mexico has historically adopted an appropriate reserves policy, with 1994 being an exception. However, under the current reserves policy, there is a positive probability of a current account crisis in the near future. In chapter Two, I investigate the optimal reserves policy. The analysis predicts an optimal level of reserves in Mexico that is considerably higher than the actual level. Whe...
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Papers by Salem Nechi