I am currently writing an article on the exchange rates in Moldova. A draft version of the article, entitled “Identifying the exchange rate regime in the Republic of Moldova”, was presented at the “2nd Osaka Workshop on International Economics” on February 11 this year and received a lot of feedback. It can be downloaded from SSRN (link here). Of course, the article needs to be extended, suggestions considered and remarks taken care of.

Today’s part

Somewhere is the internet, NBM officials are quoted to have said around 2004 that Moldova’s official reserves contain USD, EUR and GBP.

Initially, I included USD, EUR, ROL, RUR and UAH as potential anchor/basket currencies, but if NBM really follows a regime that defends its foreign exchange reserves, then GBP should be included too. Today I added GBP in order to see if there is any relationship. OLS showed low and insignificant coefficient for GBP. That was kinda expected, since even EUR — which is likely to have a much larger share in the reserves — showed no significant relationship. The conclusion is that either BNM is not defending its reserves, or GBP’s share is negligibly small. Or I need to use other methods :-)

Model 1: OLS, using observations 2006/04/28-2010/11/30 (T = 1198)
Dependent variable: ld_MDL_SDR
  coefficient std. error t-ratio p-value
const 5.80377e-05 7.06554e-05 0.8214 0.4116
ld_USD_SDR 0.980374 0.0386512 25.36 7.77e-114
ld_RUR_SDR −0.00929332 0.0168913 −0.5502 0.5823
ld_ROL_SDR −0.00872804 0.0143287 −0.6091 0.5426
ld_UAH_SDR 0.00555411 0.00537616 1.033 0.3018
ld_GBP_SDR 0.00170744 0.0129041 0.1323 0.8948
ld_EUR_SDR 0.0296143 0.0369970 0.8005 0.4236

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