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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.

Suggested Citation

  • Barry Eichengreen, 2006. "Insurance Underwriter or Financial Development Fund: What Role for Reserve Pooling in Latin America?," NBER Working Papers 12451, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12451
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Fritz, Barbara & Mühlich, Laurissa, 2007. "South-south monetary integration: the case for a research framework beyond the theory of optimum currency area," Discussion Papers 2007/20, Free University Berlin, School of Business & Economics.
    2. C. Randall Henning, 2011. "Coordinating Regional and Multilateral Financial Institutions," Working Paper Series WP11-9, Peterson Institute for International Economics.
    3. Olivier Jeanne, 2007. "International Reserves in Emerging Market Countries: Too Much of a Good Thing?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 38(1), pages 1-80.
    4. Demyanyk, Yuliya & Volosovych, Vadym, 2008. "Gains from financial integration in the European Union: Evidence for new and old members," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 277-294, March.
    5. Joshua Aizenman & Jaewoo Lee, 2008. "Financial versus Monetary Mercantilism: Long-run View of Large International Reserves Hoarding," The World Economy, Wiley Blackwell, vol. 31(5), pages 593-611, May.
    6. repec:rfe:zbefri:v:35:y:2017:i:2:p:391-424 is not listed on IDEAS
    7. Callen, Michael & Imbs, Jean & Mauro, Paolo, 2015. "Pooling risk among countries," Journal of International Economics, Elsevier, vol. 96(1), pages 88-99.
    8. Mario Lamberte & Peter J. Morgan, 2012. "Regional and Global Monetary Cooperation," Finance Working Papers 23190, East Asian Bureau of Economic Research.
    9. repec:rss:jnljef:v5i2p4 is not listed on IDEAS
    10. Asimiyu Gbolagade Abiola & Francis Ojo Adebayo, 2013. "Channelling The Nigeria’s Foreign Exchange Reserves into Alternative Investment Outlets: A Critical Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 813-826.

    More about this item

    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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