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Large Hoarding Of International Reserves And The Emerging Global Economic Architecture

  • JOSHUA AIZENMAN

The emerging financial configuration of developing countries has been growing managed exchange rate flexibility, greater monetary independence and deeper financial integration. Hoarding international reserves is a key ingredient enhancing the stability of this emerging configuration. International reserves help by providing self-insurance; mitigating real exchange rate effects of terms of trade shocks; and export promotion. Countries following an export-oriented growth strategy may end up with competitive hoarding, akin to competitive devaluations. The size of China and its lower sterilization costs suggest that China may be the winner of a hoarding game. Testing precautionary motives may be challenged by the 'peso problem'. Copyright � 2008 The Author. Journal compilation � 2008 Blackwell Publishing Ltd and The University of Manchester.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9957.2008.01072.x
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Article provided by University of Manchester in its journal Manchester School.

Volume (Year): 76 (2008)
Issue (Month): 5 (09)
Pages: 487-503

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Handle: RePEc:bla:manchs:v:76:y:2008:i:5:p:487-503
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