Evaluation of reserve adequacy of developing countries and an empirical study on the elements determining reserves

In developing countries and especially in our country, the level of international reserves continues to be a matter of debate by policy makers and academics. In addition to having sound policies for developing countries, one of the most important elements of getting out of a possible crisis is to have sufficient reserves. This situation further increases the importance of the adequacy of the current reserve levels. In order to determine the adequacy of the current reserve levels, firstly, fifteen countries were selected among the developing countries. In alphabetical order these countries are; Argentina, Brazil, Indonesia, South Africa, Philippines, India, Colombia, Hungary, Malaysia, Mexico, Poland, Russia, Chile, Thailand and Turkey. In determining the adequacy of the reserves of these countries, traditional methods, Kapteyn and Wijnholds method and the IMF metric updated in 2013 were used. Afterwards, the effects of ten independent variables affecting the net international reserves of developing countries were investigated. For this purpose, quarterly time series of the variables included in the model for the period 2001-2021 were used. First of all, ADF and IPS unit root tests were used to obtain the stationarity information of the variables, and then Fixed Effects and Random Effects analyzes were applied to the models. Then, Hausman test was conducted to determine which of these models is suitable. According to the results of the tests, the Driscoll Kraay Standard Error Correction estimator was determined as the most appropriate estimator. Empirical findings confirm the negative effects of exchange rate, reserve cost and energy prices on net reserves, positive effects of export volatility, imports, short-term borrowing, money supply, portfolio investments and food prices in selected countries.