International Reserves—Too Much of a Zipf’s Thing
Concentrated distribution of international reserves is puzzling. I show that the growth rates of international reserves bear only a very weak relationship to their initial stocks (scaled by GDP or in absolute terms), and that, by implication, the cross-sectional distribution of reserves conforms to Zipf's law. The law states that the size of reserves is inversely related to their ranking. Evidence in favor of the law is strong and time robust. I compare the crosssection distribution of international reserves embedded in the WEO projections to that implied by Zipf's law and find that international reserves are much less concentrated in the WEO projections than implied by Zipf's law.
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- Graham Bird & Ramkishen Rajan, 2003.
"Too Much of a Good Thing? The Adequacy of International Reserves in the Aftermath of Crises,"
The World Economy,
Wiley Blackwell, vol. 26(6), pages 873-891, 06.
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