Holding International Reserves in an Era of High Capital Mobility

By Robert P. Flood, N. Marion. Social Science Research Network, 2001

227 citations recorded by the source corpus.

Why do countries hold so much international reserves? Global reserve holdings (excluding gold) were equivalent to 17 weeks of imports at the end of 1999. That is almost double what they were at the end of 1960 and about 20 percent higher than they were at the start of the 1990s. In this paper we study countries' reserve holdings in light of both the increased financial volatility experienced in the last decade and diminished adherence to fixed exchange rates. We find that buffer-stock reserve models work about as well in the modern floating-rate period as they did during the Bretton Woods regime. During both periods, however, the models' fundamentals explain only a small portion (10-15 percent) of reserves volatility.

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Citations in the corpus

A Cross-Country Empirical Analysis of International Reserves (2009, background): “9Frenkel (1980) and Flood and Marion (2002), for example, report that exchange rate arrangements have effects on the holding of international reserves.”
Capital Account Policies and the Real Exchange Rate (2012, unknown): “…− ∫ s≥0,s 6=t u′(cs)qs s δb ∗ s e −r∗sds− u′(ct) (qt− − qt+) δb∗t , 12For the former approach see for example Edwards (1985) and Rodrik (2006), and for the latter see Flood and Marion (2001). where u′(ct) is a weighted average of the marginal utility of consumption before and after the discrete…”
Adjustment Patterns to Commodity Terms of Trade Shocks: The Role of Exchange Rate and International Reserves Policies (2012, result): “Overall, the literature of the 1980s supported these predictions (see Flood and Marion 2002).”
International Reserves Management and Capital Mobility in a Volatile World: Policy Considerations and a Case Study of Korea (2007, unknown): “The earlier literature focused on using international reserves as part of the management of an adjustable peg or managed floating exchange rate regime [Frenkel (1983), Edwards (1983); see Flood and Marion (2002) for a literature review].”
Large Hoardings of International Reserves: Are They Worth It? (2004, background): “171 LARGE HOARDINGS OF INTERNATIONAL RESERVES: ARE THEY WORTH IT? Pablo García Central Bank of Chile Claudio Soto Central Bank of Chile Several Asian economies have accumulated large stocks of international reserves over the last few years. This motivates the question we address in this paper from a”
The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications (2011, unknown): “DISCUSSION PAPER SERIES ABCD www.cepr.org Available online at: www.cepr.org/pubs/dps/DP6723.asp www.ssrn.com/xxx/xxx/xxx No. 6723 THE OPTIMAL LEVEL OF INTERNATIONAL RESERVES FOR EMERGING MARKET COUNTRIES:”