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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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File URL: http://hdl.handle.net/10.1007/s11079-007-9001-4
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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

Related research

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

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References

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  1. Guillermo Calvo, 2007. "Crises in Emerging Market Economies: A Global Perspective," Working Papers Central Bank of Chile 441, Central Bank of Chile.
  2. Tito Cordella & Eduardo Levy Yeyati, 2005. "A (New) Country Insurance Facility," IMF Working Papers 05/23, International Monetary Fund.
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Citations

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Cited by:
  1. Aizenman, Joshua & Lee, Jaewoo, 2007. "Financial versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding," Santa Cruz Department of Economics, Working Paper Series qt5r95t1xf, Department of Economics, UC Santa Cruz.
  2. Yuliya Demyanyk & Vadym Volosovych, 2007. "Gains from financial integration in the European union: evidence for new and old members," Supervisory Policy Analysis Working Papers 2007-01, Federal Reserve Bank of St. Louis.
  3. 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.
  4. Jean Imbs & Paolo Mauro, 2007. "Pooling Risk Among Countries," IMF Working Papers 07/132, International Monetary Fund.

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