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This study examines the effect of exchange rate regimes on foreign direct investment (FDI) flow for West African Monetary Zone (WAMZ). The Arellano Panel Correction for Serial Correlation and Heteroskedaticity option of the Within Estimator for fixed-effect panel data model as well as the Dynamic Panel Data Instrumental Variable Approach by Anderson and Hsiao [(1981). Estimation of dynamic models with error components. Journal of the American Statistical Association, 76, 598–606] for the countries selected based on the data availability for the period 1980–2016 were used. The fixed exchange rate regime was found to hamper FDI flow in the zone, while intermediate policy had a significantly positive effect in facilitating FDI flow during periods of declining foreign reserves and narrowing current account balance in WAMZ. This implies that the transmission of the effect of exchange rate regimes on FDI inflows depends on the positions of the foreign reserves and current account balance in the zone. The study therefore recommends the need for monetary authorities to be cautious in managing their exchange rates especially in periods of depleting foreign reserves and narrowing current account so as not to deter the much needed FDI inflow. [ABSTRACT FROM AUTHOR]

This paper shows that uncertainty about an emerging market's international reserves can affect the willingness of foreign investors to supply international credits. We illustrate the relevance of this concern for South Korea. Uncertainty has asymmetric effects. When the expected reserve position of an, emerging market is large relative to the potential bailout in bad states of nature, reserve volatility does not matter. However, the same amount of reserve volatility, can cause a large reduction in the supply of international credit if the private sector seriously downgrades its priors about repayment possibilities or becomes more pessimistic about the emerging market's reserve position. [ABSTRACT FROM AUTHOR]

Previous literature believes that a commercial depreciation is associated with higher financial premium and more depletion of foreign reserves. This study re-investigates this belief. Analytical results indicate that a commercial depreciation with higher financial premium and more depletion of foreign reserves depend on the combined influences of the conditions that individuals are impatient as well as foreign interest rates are bigger than time preference rates rather than only policies of commercial depreciation. Non-distortion taxation does not solve the balance-of-payments difficulties. An exact negative relationship between foreign reserves and the financial premium cannot be found. [ABSTRACT FROM AUTHOR]

This paper investigates the changing pattern and efficacy of sterilization within emerging market countries as they liberalize markets and integrate with the world economy. We estimate the marginal propensity to sterilize foreign asset accumulation associated with net balance of payments inflows, across countries, and over time. We find that the extent of sterilization of foreign reserve inflows has risen in recent years to varying degrees in Asia as well as in Latin America, consistent with greater concerns about the potential inflationary impact of reserve inflows. We also find that sterilization depends on the composition of balance of payments inflows. [ABSTRACT FROM AUTHOR]

China now holds the world's largest foreign exchange reserves mainly thanks to dynamic export activities. In order to invest and manage these foreign exchange reserves, the Chinese government recently announced the constitution of a new State Foreign Exchange Investment Company (SFEIC) aimed at improving the yield on them. This new investment vehicle will face multiple challenges ranging from showing solid financial gains to establishing effective rules for corporate governance that guarantee transparency in company management. In addition to the legal aspects, numerous economic and political implications will arise from this new government-controlled tool. [ABSTRACT FROM AUTHOR]

This article presents comments and discussion on a paper titled "International Reserves in Emerging Market Countries: Too Much of a Good Thing?" which was presented at the Brookings Panel on Economic Activity in March of 2007. The author praises the careful formulation given of a utility-based welfare and analysis of optimal hoarding of international reserves. A calibration is presented that allows an evaluation of the degree to which recent hoarding trends are consistent with the model's predictions. A framework based on an elegant model provides strong predictions about optimal usable reserves.

This article presents a risk analysis assessing the large foreign reserves holdings of emerging market countries. The paper was presented at the Brookings Panel on Economic Activity in March of 2007. The policy challenges and opportunities of buildup in emerging market countries' "sovereign wealth" is explored, and what the impact of sovereign wealth diversification on global financial markets might be. The author reviews ways in which this wealth could be used in collective international arrangements both to insure against future crises and to promote financial development.

With the People's Republic of China flush with US foreign reserves generated from a significant trade imbalance with the United States (US), Chinese firms have begun to exercise foreign direct investment by acquiring US corporations. Considering the emerging military threat of China in the Pacific Rim area and economic issues involving the under-valuation of the Chinese yuan, this investment diversity strategy (beyond US Treasury debt) has resulted in serious questions being raised about whether national and economic security is at risk if these business transactions were to be consummated. Consequently, the Committee on Foreign Investment in the United States (CFIUS), the federal oversight commission reviewing the appropriateness of such transactions, has come under intense Congressional scrutiny. After evaluating the literature concerning the operations and performance of CFIUS, it is recommended that CFIUS share its operational performance on a quarterly basis with select committees in the US Congress; that mandated filings of specific categories of defense-related acquisitions be authorized; and that both CFIUS and the US President (and not the US Congress) continue to define what is 'national security'. [ABSTRACT FROM AUTHOR]