Hrytsyshyn A. Management of International Reserves in Central and Eastern European Countries.

This paper presents a research on theoretical and practical aspects of international reserve management in Central and Eastern European (CEE) countries. All the countries are divided into two groups for further research: 1) First group – CEE countries which are member states of the EU and euro area (Estonia, Latvia, Lithuania, the Slovak Republic, Slovenia); 2) Second group – CEE countries which are member states of the EU and have their own national currencies (Poland, Hungary, the Czech Republic, Bulgaria, Romania). The dissertation analyses in detail the activities of the central banks of CEE countries in the sphere of international reserves management. Adequacy of international reserves is measured for CEE countries by such criteria: the ratio of international reserves to imports, the ratio of international reserves to GDP, the ratio of international reserves to money supply, the ratio of international reserves to short-term external debt. The structure of international reserves of CEE countries according to the IMF classification is researched by following positions: official foreign reserves; the IMF reserve position; special drawing right (SDRs); gold; other reserve assets. Generalised classification of determinants of international reserves includes following categories: size and level of economic growth, current account of balance of payments, capital account of balance of payments, exchange rate volatility, opportunity cost of international reserves and institutional factors. Based on this classification, a regression analysis of the main determinants of international reserves for two groups of CEE countries has been conducted. For the first group of CEE countries such indicators as GDP per capita, the ratio of foreign direct investment to GDP and the Joneses index have been found significant. For the second group of CEE countries such indicators as GDP per capita and the opportunity cost of international reserves have been found significant. If GDP per capita and ratio of foreign direct investment to GDP increase, the volume of international reserves in CEE countries is also increasing. If opportunity cost of international reserves and the Joneses index increase, the volume of reserve assets in CEE countries is decreasing. Average import propensity, average export propensity and real effective exchange rate have been found not significant determinants of international reserves for all CEE countries.