Monetary Equilibrium and International Reserve Flows in Australia1
J. RICHARD ZECHER
The balance of payments in an open economy plays an important role in determining changes in the stock of domestic money. International reserve inflows, for example, will increase the domestic stock of money if they are added directly to the money balances of residents, or if they are exchanged for domestic currency at the central bank.2 In Australia, reserve flows are an important factor, and occasionally a dominant one, in determining changes in the domestic stock of money.3 This observation raises the question, what are the major determinants of Australian reserve flows and what role, if any, do policy actions play in affecting reserve ...
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