01329pab a2200133 454500008004000000100002600040245008000066260000900146300001300155362000800168520095300176650002101129773004501150180718b1996   xxu||||| |||| 00| 0 eng d  aPattanaik, Sitikantha  aManagement of official reserves: the perspectives and the Indian experience  c1996  ap.93-120  aJun  a"The paper highlights some of the issues relating to management of official reserves in the context of a market based exchange rate policy, a liberalised payments regime and the healthy build up of reserves experienced since April 1993 in India. The focus is on identifying the major determinants of demand for reserves and estimating the reserve demand function which would help in assessing reserve optimality. Econometric analysis conducted in the paper using both conventional and cointegration techniques indicates that volume of international transactions (i.e. scale factors) and the volatility of such transactions (i.e. instability) are the important determinants of demand for reserves in India which underscores the importance of a stable external environment for management of reserve levels. The cointegration results also establish the opportunity costs of holding reserves as another important determinant of reserve demand in India"  aForeign exchange  aReserve Bank of India: Occasional Papers