Large hoarding of international reserves and the emerging global economic architecture

Joshua Aizenman

Research output: Contribution to journalArticlepeer-review

21 Scopus citations

Abstract

The emerging financial configuration of developing countries has been growing managed exchange rate flexibility, greater monetary independence and deeper financial integration. Hoarding international reserves is a key ingredient enhancing the stability of this emerging configuration. International reserves help by providing self-insurance; mitigating real exchange rate effects of terms of trade shocks; and export promotion. Countries following an export-oriented growth strategy may end up with competitive hoarding, akin to competitive devaluations. The size of China and its lower sterilization costs suggest that China may be the winner of a hoarding game. Testing precautionary motives may be challenged by the 'peso problem'.

Original languageEnglish
Pages (from-to)487-503
Number of pages17
JournalManchester School
Volume76
Issue number5
DOIs
StatePublished - 1 Sep 2008
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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