Financial Versus Monetary Mercantilism: Long-Run View of the Large International Reserves Hoarding
AbstractThe sizable hoarding of international reserves by several East Asian countries has been frequently attributed to a modern version of monetary mercantilism-hoarding international reserves in order to improve competitiveness. From a long-run perspective, manufacturing exporters in East Asia adopted financial mercantilism-subsidizing the cost of capital- during decades of high growth. They switched to hoarding large international reserves when growth faltered, making it harder to disentangle the monetary mercantilism from a precautionary response to the heritage of past financial mercantilism. Monetary mercantilism also lowers the cost of hoarding through its short-term boost to external competitiveness, but may be associated with negative externalities leading to competitive hoarding.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 06/280.
Date of creation: 01 Dec 2006
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-04 (All new papers)
- NEP-CBA-2007-05-04 (Central Banking)
- NEP-MON-2007-05-04 (Monetary Economics)
- NEP-SEA-2007-05-04 (South East Asia)
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