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Countries hold foreign currency reserves to support and influence exchange rate. This paper examines the causal relationship between exchange rate and reserves in six Asian countries. We obtain divergent evidence regarding the long-run and stable relationship between reserves and exchange rate in the sample countries. There is evidence of bidirectional causality between reserves and exchange rate in India, while no-causality in Bangladesh. There is unidirectional causality from reserves to exchange rate in Pakistan, Sri Lanka and Thailand and unidirectional causality from exchange rate to reserves in Philippines. It is concluded that holding of reserves is necessary for supporting exchange rate and vice versa. [ABSTRACT FROM AUTHOR]

This paper empirically investigates the importance of precautionary and mercantilist approaches to international reserves in the Indian context using monthly data from 1993:06 to 2007:03. The ARDL approach to cointegration is used to estimate as in the long-run relationship between reserves and its determinants. The empirical results show that the impact of the volatility of Foreign Institutional Investment which captures the precautionary motive, and that of undervalued real exchange rate which is associated with the mercantilist view on reserves are statistically significant in the long run. We conclude that both the precautionary and mercantilist motives explain reserve accumulation in India over the study period. [ABSTRACT FROM AUTHOR]

India's foreign exchange reserves have risen rapidly since the balance-of-payment crisis in 1991 to over US$155 billion by mid-2006. India is now the fifth largest Asian reserve holder. Despite this, scant attention has been paid to the rationale for and impact of reserves accumulation in India. This paper estimates the extent of de facto sterilization and capital mobility concurrently for the period 1990:q1-2004:q4. While India appears to have sterilized capital inflows quite aggressively, as the extent of de facto capital mobility continues to rise, it might become increasingly difficult to continue to sterilize going forward. [ABSTRACT FROM AUTHOR]

Focuses on the economic cooperation between India and the United Arab Emirates in the 1990s. Maintenance of a high level of per capita income by United Arab Emirates; Amount of gross international reserves of India; Contribution of the oil sector to the UAE's gross domestic product.