Search Results
Journal Article
Sovereign wealth funds: stumbling blocks or stepping stones to financial globalization?
Sovereign wealth funds (SWFs) are saving funds controlled by sovereign governments that hold and manage foreign assets. Private analysts put current sovereign wealth fund assets in the range of $1.5 to 2.5 trillion. This amount is projected to grow sevenfold to $15 trillion in the next ten years, an amount larger than the current global stock of foreign reserves of about $5 trillion (Jen 2007). While not a new phenomenon, the recent activities and projected growth of SWFs have stirred debate about the extent to which their size may allow them to destabilize financial markets and their ...
Journal Article
Financial liberalization: how well has it worked for developing countries?
This Economic Letter gives a summary of another analysis of the impact of financial liberalization on the economic performance of developing countries from 1991 to 2001. It describes a new and simple method that measures the degree of international capital mobility and that also provides useful information about the degree to which a nation's domestic stock of capital is self-financed.
Journal Article
Foreign exchange reserves in East Asia: why the high demand?
Working Paper
The high demand for international reserves in the Far East: what's going on?
This paper explores econometric and theoretical interpretations for the relatively high demand for international reserves by countries in the Far East and the relatively low demand by some other developing countries. Using a sample of about 125 developing countries, we show that reserve holdings over the 1980-1996 period seem to be the predictable outcome of a few key factors, such as the size of international transactions, their volatility, the exchange-rate arrangement, and political considerations. The estimating equation also does a good job of predicting reserve holdings in Asia before ...
Conference Paper
Hoarding international reserves versus a Pigovian tax-cum-subsidy scheme: Reflections on the deleveraging crisis of 2008-9, and a cost benefit analysis
In this paper we outline a Pigovian tax-cum-subsidy scheme that deals with concerns about the costs and efficacy of hoarding international reserves (IR) as a means of self-insurance against a deleveraging crisis. We overview the degree to which IR provided self-insurance to Emerging Markets (EMs) during the 2008-9 crisis, pointing out that the fear of losing IR constrained the use of a pre-crisis IR war-chest. The crisis validates the need for external debt management policy. EMs found that their initial large stocks of IR were not enough to prevent runs on their IR and large currency ...
Conference Paper
Uncertainty and the disappearance of international credit
Conference Paper
The high demand for international reserves in the Far East: what's going on?
This paper explores econometric and theoretical interpretations for the relatively high demand for international reserves by countries in the Far East and the relatively low demand by some other developing countries. Using a sample of about 125 developing countries, we show that reserve holdings over the 1980-1996 period seem to be the predictable outcome of a few key factors, such as the size of international transactions, their volatility, the exchange-rate arrangement, and political considerations. The estimating equation also does a good job of predicting reserve holdings in Asia before ...
Conference Paper
International reserves: precautionary versus mercantilist views, theory and evidence
This paper tests the importance of precautionary and mercantilist motives in accounting for the hoarding of international reserves by developing countries, and provides a model that quantifies the welfare gains from optimal management of international reserves. While the variables associated with the mercantilist motive are statistically significant, their economic importance in accounting for reserve hoarding is close to zero and is dwarfed by other variables. Overall, the empirical results are in line with the precautionary demand. The effects of financial crises have been localized, ...
Working Paper
Sterilization, Monetary Policy, and Global Financial Integration
This paper investigates the changing pattern and efficacy of sterilization within emerging market countries as they liberalize markets and integrate with the world economy. We estimate the marginal propensity to sterilize foreign asset accumulation associated with net balance of payments inflows, across countries and over time. We find that the extent of sterilization of foreign reserve inflows has risen in recent years to varying degrees in Asia as well as in Latin America, consistent with greater concerns about the potential inflationary impact of reserve inflows. We also find that ...
Working Paper
Military Expenditure, Threats, and Growth
This paper clarifies one of the puzzling results of the economic growth literature: the impact of military expenditure is frequently found to be non-significant or negative, yet most countries spend a large fraction of their GDP on defense and the military. We start by empirical evaluation of the non- linear interactions between military expenditure, external threats, corruption, and other relevant controls. While growth falls with higher levels of military spending, given the values of the other independent variables, we show that military expenditure in the presence of threats increases ...