The International Reserves Holding And Country Risk: Evidence From Selected Asean Countries

This paper extends the empirical literature on the relationship between the country risk and the demand for international reserves in selected ASEAN4 economies, namely Malaysia, Indonesia, Thailand and the Philippines, for the period 1980 to 2006. The empirical findings reveal that the fiscal position and stock of external indebtedness have a huge impact on a country's decision to hold international reserves. In addition, the results also find that Indonesia, a country with the highest risk in terms of economic and financial sectors, has taken corrective measures to deal with any sudden shocks.