On the Effect of Opportunity Cost on International Reserve Holdings
The opportunity cost of holding international reserves plays a central role in all models of optimal demand for foreign exchange. This cost is conventionally defined as the difference between the yield on reserves and the marginal productivity forgone from an alternative investment in fixed capital. Most empirical studies have failed to find a significant opportunity-cost effect, since none of them measure it in accordance with its theoretical definition. The results for Israel show that, when this cost is measured properly, it turns out to be a crucial determinant of reserve demand. Copyright 1992 by MIT Press.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 74 (1992)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: http://mitpress.mit.edu/journals/|
|Order Information:||Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535|