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Reserve Adequacy In Asia Revisited: New Benchmarks Based On The Size And Composition Of Capital Flow

Author

Listed:
  • Jung Sik Kim

    (Yonsei University)

  • Jie Li

    (Central University of Finance and Economics)

  • Ramkishen S. Rajan

    (George Mason University)

  • Ozan Sula

    (Western Washington University)

  • Thomas D. Willett

    (Claremont Colleges)

Abstract

There has been considerable debate about the rationale behind the reserve hoarding by Asia, with wide ranging explanations has been offered for this behavior. In view of the ferocity and suddenness of the Asian crisis of 1997-98, the precautionary motive no doubt looms large in the decision to build up reserves to unprecedently high levels. This paper deals more narrowly with the issues of additive coverage ratios that some of the central banks are using and presenting new benchmarks for judging reserve adequacy based on the behavior of different types of capital flows during currency crises. Alternative measures of the ��size�� of recent crises and their implications for levels of reserve adequacy for a number of Asian countries today are also considered.

Suggested Citation

  • Jung Sik Kim & Jie Li & Ramkishen S. Rajan & Ozan Sula & Thomas D. Willett, 2007. "Reserve Adequacy In Asia Revisited: New Benchmarks Based On The Size And Composition Of Capital Flow," Korean Economic Review, Korean Economic Association, vol. 23, pages 131-158.
  • Handle: RePEc:kea:keappr:ker-200706-23-1-07
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Aizenman, Joshua & Pinto, Brian, 2011. "Managing Financial Integration and Capital Mobility— Policy lessons from the past two decades," Santa Cruz Department of Economics, Working Paper Series qt9j53m1tp, Department of Economics, UC Santa Cruz.
    2. Sula, Ozan & Willett, Thomas D., 2006. "Reversibility of Different Types of Capital Flows to Emerging Markets," MPRA Paper 384, University Library of Munich, Germany.
    3. Enrique Alberola & José María Serena, 2007. "Global financial integration, monetary policy and reserve accumulation. Assessing the limits in emerging economies," Working Papers 0706, Banco de España;Working Papers Homepage.
    4. Joshua Aizenman & Brian Pinto, 2013. "Managing Financial Integration and Capital Mobility—Policy Lessons from the Past Two Decades," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 636-653, September.
    5. Jie Li & Alice Ouyang, 2011. "Currency crises: can high reserves offset vulnerable fundamentals?," Applied Economics, Taylor & Francis Journals, vol. 43(16), pages 2055-2069.
    6. Chandan Sharma, 2009. "Does Full Sterilization Feasible in Era of Excess Volatility: Evidence from India," Economics Bulletin, AccessEcon, vol. 29(4), pages 2944-2950.
    7. Li, Jie & Rajan, Ramkishen S., 2006. "Can High Reserves Offset Weak Fundamentals? A Simple Model of Precautionary Demand for Reserves," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 59(3), pages 317-328.
    8. Martín Redrado & Jorge Carrera & Diego Bastourre & Javier Ibarlucia (ed.), 2006. "The Economic Policy of Foreign Reserve Accumulation: New International Evidence," BCRA Paper Series, Central Bank of Argentina, Economic Research Department, number 02, December.
    9. Cavoli, Tony & Rajan, Ramkishen S., 2009. "Managing Risks in a Volatile Environment: The Capital Inflows Problem in Asia," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 62(3), pages 325-340.
    10. Ramkishen S. Rajan, 2006. "Monetary and Financial Cooperation in Asia : Emerging Trends and Prospects," Finance Working Papers 22125, East Asian Bureau of Economic Research.

    More about this item

    Keywords

    capital flows; currency crises; external debt; imports; liquidity; reserves;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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