Exchange Rate Volatility and Reserves Transparency

The effects of the adoption of the IMF's International Reserves and Foreign Currency Liquidity Data Template on exchange rate volatility are investigated for 48 countries using panel data models and quarterly data from 1991 to 2005. In a model featuring significant relationships between nominal exchange rate volatility and fundamental macroeconomic variables, we find that the adoption of the reserves data dissemination standard is associated with a 20 percent decrease in volatility. Furthermore, adoption of the standard is also associated with changes in the relationships between exchange rate volatility and both indebtedness and reserve adequacy indicators. IMF Staff Papers (2007) 54, 741–754. doi:10.1057/palgrave.imfsp.9450025