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Insurance Underwriter or Financial Development Fund: What Role for Reserve Pooling in Latin America?

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  • Barry Eichengreen

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Abstract

The accumulation of international reserves by emerging markets raises the question of how to best utilize these funds. This paper explores two routes through which the pooling of reserves could enhance stability and welfare. First, the reserve pool could be used for emergency lending in response to sudden stops. Second, a portion of the reserve pool along with borrowed funds could be used to purchase contingent debt securities issued by governments and corporations, helping to solve the first-mover problem that limits the liquidity of markets in these instruments and hinders their acceptance by private investors. This paper argues that the second option is more likely to be feasible and productive. Copyright Springer Science+Business Media, LLC 2007

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 18 (2007)
Issue (Month): 1 (February)
Pages: 27-52

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Handle: RePEc:kap:openec:v:18:y:2007:i:1:p:27-52

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Web page: http://www.springerlink.com/link.asp?id=100323

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Keywords: International reserves; Reserve pooling; Insurance; Financial development; F0; F4;

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Cited by:
  1. Mario Lamberte & Peter J. Morgan, 2012. "Regional and Global Monetary Cooperation," Finance Working Papers 23190, East Asian Bureau of Economic Research.
  2. Joshua Aizenman & Jaewoo Lee, 2006. "Financial Versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding," NBER Working Papers 12718, National Bureau of Economic Research, Inc.
  3. C. Randall Henning, 2011. "Coordinating Regional and Multilateral Financial Institutions," Working Paper Series WP11-9, Peterson Institute for International Economics.
  4. Demyanyk, Yuliya & Volosovych, Vadym, 2008. "Gains from financial integration in the European Union: Evidence for new and old members," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 277-294, March.
  5. Asimiyu Gbolagade Abiola & Francis Ojo Adebayo, 2013. "Channelling The Nigeria’s Foreign Exchange Reserves into Alternative Investment Outlets: A Critical Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 813 - 826.
  6. Fritz, Barbara & Mühlich, Laurissa, 2007. "South-south monetary integration: the case for a research framework beyond the theory of optimum currency area," Discussion Papers 2007/20, Free University Berlin, School of Business & Economics.
  7. Imbs, Jean & Mauro, Paolo, 2007. "Pooling Risk Among Countries," CEPR Discussion Papers 6461, C.E.P.R. Discussion Papers.
  8. Suman S. Basu & Ran Bi & Prakash Kannan, 2010. "Regional reserve pooling arrangements," Proceedings, Federal Reserve Bank of San Francisco, issue Oct.

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