International Reserves : Precautionary versus Mercantilist Views , Theory and Evidence

@inproceedings{Lee2006InternationalR,
  title={International Reserves : Precautionary versus Mercantilist Views , Theory and Evidence},
  author={Jaewoo Lee and Joshua Aizenman and Aleksandra R Pavlovi{\'c} Markovi{\'c} and Michael K Dooley and Ann Harrison and Linda Goldberg and Pierre-Olivier Gourinchas and Maury Obstfled and Brian L. Pinto and Ramkishen S. Rajan and Andy Rose and Partha Sen and George S. Tavlas and Tom Willett and Mervyn A. King},
  year={2006}
}
This paper compares the importance of precautionary and mercantilist motives in the hoarding of international reserves by developing countries. Overall, empirical results support precautionary motives; in particular, a more liberal capital account regime increases international reserves. Theoretically, large precautionary demand for international reserves arises as a self-insurance to avoid costly liquidation of long-term projects when the economy is susceptible to sudden stops. The welfare… CONTINUE READING
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