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International Reserves-Too Much of a Zipf's Thing

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  • Mariusz A. Sumlinski
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    Abstract

    Concentrated distribution of international reserves is puzzling. I show that the growth rates of international reserves bear only a very weak relationship to their initial stocks (scaled by GDP or in absolute terms), and that, by implication, the cross-sectional distribution of reserves conforms to Zipf''s law. The law states that the size of reserves is inversely related to their ranking. Evidence in favor of the law is strong and time robust. I compare the crosssection distribution of international reserves embedded in the WEO projections to that implied by Zipf''s law and find that international reserves are much less concentrated in the WEO projections than implied by Zipf''s law.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/11.

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    Length: 19
    Date of creation: 01 Jan 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/11

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    Related research

    Keywords: World Economic Outlook; statistics; samples; reserve holdings; reserve accumulation; descriptive statistics; correlation; equations; financial statistics; equation; standard deviation; significance levels; short term debt; reserve management; reserve bank; reserve assets; standard error; independent variable; correlations; balance of payments; central bank; current account balance; sample selections; current account; external debt; probability;

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    1. Xavier Gabaix, 1999. "Zipf'S Law For Cities: An Explanation," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 739-767, August.
    2. Graham Bird & Ramkishen Rajan, 2002. "Too Much of a Good Thing?: The Adequacy of International Reserves in the Aftermath of Crises," Centre for International Economic Studies Working Papers 2002-10, University of Adelaide, Centre for International Economic Studies.
    3. Olivier Jeanne, 2007. "International Reserves in Emerging Market Countries: Too Much of a Good Thing?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(1), pages 1-80.
    4. Krugman, Paul, 1996. "Confronting the Mystery of Urban Hierarchy," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 399-418, December.
    5. Rose, Andrew K, 2005. "Cities and Countries," CEPR Discussion Papers 5235, C.E.P.R. Discussion Papers.
    6. Ben-Bassat, Avraham & Gottlieb, Daniel, 1992. "On the Effect of Opportunity Cost on International Reserve Holdings," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 329-32, May.
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    Cited by:
    1. Cerezo Aguirre, Sergio Cerezo Aguirre, 2010. "Consideraciones sobre el nivel óptimo de reservas internacionales para Bolivia: 2003-2009," Revista Latinoamericana de Desarrollo Economico, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana, issue 14, pages 41-70.

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