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

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  • Barry Eichengreen

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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12451.

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Date of creation: Aug 2006
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Publication status: published as Barry Eichengreen, 2007. "Insurance Underwriter or Financial Development Fund: What Role for Reserve Pooling in Latin America?," Open Economies Review, Springer, vol. 18(1), pages 27-52, February.
Handle: RePEc:nbr:nberwo:12451

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  1. Aizenman, Joshua & LEE, JAEWOO, 2005. "International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence," Santa Cruz Center for International Economics, Working Paper Series, Center for International Economics, UC Santa Cruz qt44g3n2j8, Center for International Economics, UC Santa Cruz.
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  4. Hazel Selvon & Tracy Polius & Oral Williams, 2001. "Reserve Pooling in the Eastern Caribbean Currency Union and the CFA Franc Zone," IMF Working Papers 01/104, 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, Federal Reserve Bank of St. Louis 2007-01, Federal Reserve Bank of St. Louis.
  3. Jean Imbs & Paolo Mauro, 2007. "Pooling Risk Among Countries," IMF Working Papers 07/132, International Monetary Fund.
  4. Suman S. Basu & Ran Bi & Prakash Kannan, 2010. "Regional reserve pooling arrangements," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Oct.
  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. Lamberte, Mario & Morgan , Peter J., 2012. "Regional and Global Monetary Cooperation," ADBI Working Papers, Asian Development Bank Institute 346, Asian Development Bank Institute.
  7. 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.
  8. C. Randall Henning, 2011. "Coordinating Regional and Multilateral Financial Institutions," Working Paper Series, Peterson Institute for International Economics WP11-9, Peterson Institute for International Economics.

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