Hoarding of International Reserves: Mrs Machlup’s Wardrobe and the Jonesesroie_850

Abstract

Motivated by the observed international reserve hoarding behavior in the post-1997 crisis period, we explore the Mrs Machlup’s Wardrobe hypothesis and the related keeping up with the Joneses argument. It is conceived that, in addition to psychological reasons, holding a relatively high level of international reserves reduces the vulnerability to speculative attacks and promotes growth. A stylized model is constructed to illustrate this type of hoarding behavior. The relevance of the keeping up with the Joneses effect is examined using a few plausible empirical specifications and data from 10 East Asian economies. Panel-based regression results are suggestive of the presence of the Joneses effect, especially in the post-1997 crisis period.

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Cite this paper

@inproceedings{Cheung2009HoardingOI, title={Hoarding of International Reserves: Mrs Machlup’s Wardrobe and the Jonesesroie_850}, author={Yin-Wong Cheung and Xingwang Qian and Joshua Aizenman and Michel Beine and Bertrand Candelon and Ken Chan and C. Engel and Jakob de Haan and Viktoria Hnatkovska and Mathias Hoffmann and Reuven Glick and Paul de Grauwe and Fred Kwan and Assaf Razin and Eli Remolona and G. Schnabl and Pierre L. Siklos and Mark M. Spiegel and Yong Wang and Tom Willett and Frank Westermann}, year={2009} }