Template-Type: ReDIF-Paper 1.0
Author-Name: Shakill Hassan
Author-Name: Merrisa Paul
Author-Name: Siobhan Redford
Title: Vulnerability to Normalization of Global Financing Conditions An Operational Approach
Abstract: A simple ratio of foreign exchange reserves to the gross external financing requirement (GEFR) largely explains the cross-sectional variation in exchange rate depreciation over the taper tantrum in 2013. We update the ratio for a set of emerging markets, and compare current to previous exposure. South Africas relative position barely changed between mid-2013 and early 2015. In contrast, India rapidly increased its ratio of reserves-to-GEFR through improvements in each component of the indicator; and forcefully reduced inflation. We document a reduction in high-frequency reactions of the rupee to FOMC meetings. Reducing vulnerability to imminent tightening in US monetary policy requires, above all, reducing the external financing requirement and/or increasing the stock of reserves.
Creation-Date: 2015-10-29
File-URL: http://www.resbank.co.za/content/dam/sarb/publications/working-papers/2015/6941/WP1504.pdf
File-Format: application/pdf
File-Function: Revision
Number: 6941
Handle: RePEc:rbz:wpaper:6941