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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. Copyright Springer Science+Business Media, LLC 2007

Suggested Citation

  • 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:kap:openec:v:18:y:2007:i:1:p:27-52
    DOI: 10.1007/s11079-007-9001-4
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    More about this item

    Keywords

    International reserves; Reserve pooling; Insurance; Financial development; F0; F4;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F39 - International Economics - - International Finance - - - Other

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