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Is the accumulation of international reserves good for development?

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  • Moritz Cruz
  • Bernard Walters

Abstract

International reserves accumulation has been the preferred policy recently adopted by developing economies to achieve financial stability. The aim of this policy is to increase liquidity and thus reduce the risk of suffering a speculative attack. The main concern expressed in the literature has been related to its cost. Most of the studies conclude that the opportunity cost of international reserves accumulation is around 1% of GDP. However, these studies have not analysed whether this strategy is, or could be, more broadly supportive of development, an issue that must be of central interest for developing economies. The aim of this paper is to show that the stockpiling of international reserves is not optimal for developmental purposes and that there exist alternative policies that can be applied to achieve financial stability, policy autonomy and a better performance in terms of development. Copyright The Author 2008. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

Suggested Citation

  • Moritz Cruz & Bernard Walters, 2008. "Is the accumulation of international reserves good for development?," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 665-681, September.
  • Handle: RePEc:oup:cambje:v:32:y:2008:i:5:p:665-681
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    File URL: http://hdl.handle.net/10.1093/cje/ben028
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    References listed on IDEAS

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    1. Reservas internacionales, un debate necesario
      by in Tiempo Económico on 2012-07-16 14:47:07

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    Cited by:

    1. Moritz Cruz & Peter Kriesler, 2010. "International Reserves, Effective Demand and Growth," Review of Political Economy, Taylor & Francis Journals, vol. 22(4), pages 569-587.
    2. André Nassif & Carmem Feijó & Marco Antônio Silveira De Almeida, 2011. "Why Does Real Exchange Rate Overvalue Inbrazil? Theoretical Determinants, Empirical Evidence And Economicpolicy Dilemmas," Anais do XXXVIII Encontro Nacional de Economia [Proceedings of the 38th Brazilian Economics Meeting] 237, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    3. Anna M. Carabelli & Mario A. Cedrini, 2010. ">i>Indian Currency>/i> and beyond: the legacy of the early economics of Keynes in the times of Bretton Woods II," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 33(2), pages 255-280, January.
    4. Ä°mre ERSOY, 2011. "On Reserve Hoarding In Emes: The Case Of Turkey," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 6(3(17)/ Fa), pages 230-243.
    5. Carabelli, Anna & Cedrini, Mario, 2013. "Globalization and Keynes's Ideal of a 'Sounder Political Economy between All Nations," CESMEP Working Papers 201305, University of Turin.
    6. Prakash Kumar Shrestha, Ph.D., 2016. "Macroeconomic Impact of International Reserves: Empirical Evidence from South Asia," NRB Working Paper 32/2016, Nepal Rastra Bank, Research Department.
    7. Nguyen, Vu Hong Thai & Boateng, Agyenim, 2015. "Bank excess reserves in emerging economies: A critical review and research agenda," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 158-166.
    8. Prakash Shrestha, 2017. "Macroeconomic Impact of International Reserves: Empirical Evidence from South Asia," Working Papers id:12166, eSocialSciences.
    9. Jörg Bibow, 2010. "Global imbalances, the US dollar, and how the crisis at the core of global finance spread to "self-insuring" emerging market economies," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(2), pages 325-359.
    10. Mei-yin Lin, 2011. "Foreign Reserves and Economic Growth: Granger Causality Analysis with Panel Data," Economics Bulletin, AccessEcon, vol. 31(2), pages 1563-1575.

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