Financial Versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding

Joshua Aizenman () and Jaewoo Lee ()

No 12718, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The sizable hoarding of international reserves by several East Asian countries has been frequently attributed to a modern version of monetary mercantilism -- hoarding international reserves in order to improve competitiveness. From a long-run perspective, manufacturing exporters in East Asia adopted financial mercantilism -- subsidizing the cost of capital -- during decades of high growth. They switched to hoarding large international reserves when growth faltered, making it harder to disentangle the monetary mercantilism from precautionary response to the heritage of past financial mercantilism. Monetary mercantilism also lowers the cost of hoarding, but may be associated with negative externalities leading to competitive hoarding.

JEL-codes: F15 F31 F43 F51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mon and nep-sea
Date: 2006-12
Note: IFM ITI
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Journal Article: Financial versus Monetary Mercantilism: Long-run View of Large International Reserves Hoarding (2008)
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