Demand For International Reserves in ASEAN-5 Economies

The ASEAN-5 economies were observed to increase their demand for international reserves after the 1997 Asian financial crisis. This was coincided with their consistent current account surplus during the same period. Thus, this study attempts to investigate the existence of long-run relationship between reserve demand and current account for the period of 1997-2005. The Autoregressive Distributed Lag (ARDL) bounds test approach as proposed by Pesaran, Shin, and Smith (2001) was employed, and the empirical results revealed that current account surplus leads to the rise in the demand for international reserves in Indonesia, Malaysia, and Singapore.