Demand for international reserves in developing nations: A quantile regression approach

I estimate the determinants of the demand for international reserves using quantile regressions. Employing a dataset of 108 developing nations over the period of 1980–2007, I find considerable differences at different points of the conditional distribution of reserves. The estimates of elasticities that were found to be insignificant in ordinary least squares regressions become statistically significant at various quantiles of the distribution. Furthermore, majority of the explanatory variables have lower coefficients for the nations that are located on the right tail of the conditional reserve distribution. This finding shows that the level of reserves is as important as the other determinants of the demand for reserves.