Working Paper: NBER ID: w13902
Authors: Joshua Aizenman; Reuven Glick
Abstract: 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.
Keywords: sterilization; monetary policy; global financial integration
JEL Codes: F15; F21; F31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| concerns about inflation (E31) | sterilization efforts (I19) |
| type of balance of payments inflows (F32) | degree of sterilization (Y40) |
| benefits of sterilization (J32) | sustainability of sterilization policy (Q56) |
| rising costs (J32) | sustainability of sterilization policy (Q56) |
| diminishing returns (D29) | sustainability of sterilization policy (Q56) |
| foreign reserve inflows (F31) | intensity of sterilization efforts (C90) |