Emerging economies hoard dollars

US dollar reserves in emerging economies have more than doubled in the last decade to maintain undervalued exchange rates and defend their export competitiveness, according to research by the Royal Economic Society (RES). However, this has not prevented their share prices from falling during the global financial crisis just as much as they did in high-income countries, the research revealed. The correlation between reserves and the pressure of outflows during the crisis seems to be negative, and in 75 per cent of the developing economies studied, share prices in the banking sector had peaked before 2008.