The Long-Run Effect of International Reserves on Economic Growth in Developing Economies

Abstract

This paper attempts to empirically investigate the effect of international reserves growth on economic growth in the long-run in 41 developing countries over the period 1970-2019. For this purpose, we employ the CS-ARDL and CS-DL estimators to take into account heterogeneity and cross-sectional dependence that may present in our panels, as well as the DFE and MG estimators which are the traditional panel data estimators. The empirical evidence confirms the deteriorating impact of inflation and the significant positive effect of international reserves on the long-run economic growth in the selected sample of countries.