Vol 5, No 1 (2017)

On the Role of Contagion Effects in Total Reserves in South America

Paulo Matos, Felipe Reis


With the growth of international reserves in the last decades, the existence of contagion and financial integration between Argentina, Brazil, Chile, Colombia and Peru is found by Matos et al., (2014). We add to the international reserve literature using the Frenkel and Jovanovic (1981) buffer stock model. Our fundamental innovations are the consideration of the cross-effects of conditional volatilities, spreads and imports on the model. The joint estimation of this framework allows a considerable increase in the explanatory power in addition to detecting the relevant role of the volatility of the Colombian reserves, Argentine spreads and imports from Brazil and Chile in the modeling of reserves in other countries. In this period, too, one can see oscillation between a more daring and a conservative stance on the accumulation of international reserves in these countries.

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South America; International Reserves; Buffer Stock; Cross-Effects; VEC.

Publication information

Volume 5, Issue 1
Year of Publication: 2017
ISSN: 1857 - 8721
Publisher: EDNOTERA

How to cite

Matos, P. and Reis, F.: On the Role of Contagion Effects in Total Reserves in South America. Journal of Applied Economics and Business, Vol 5, No. 1, 5-31. (2017)