EconPapers    
Economics at your fingertips  
 

A Macroeconomic Perspective on Reserve Accumulation

Avner Bar‐Ilan and Nancy Marion ()
Authors registered in the RePEc Author Service: Avner Bar-ilan

Review of International Economics, 2009, vol. 17, issue 4, 802-823

Abstract: This paper nests the buffer stock model within a standard open‐economy model to capture two motives for international reserves accumulation—the insurance motive and the export‐led growth motive. The model is solved for two exchange‐rate policies, discretion and a rule with escape clause. It illustrates the behavior of international reserves and other macroeconomic variables when the policymaker pursues output and inflation stabilization and recognizes the supply of reserves can constrain the choice of exchange rate and the choice of exchange rate affects the supply of reserves. When output is below potential, it is optimal under both discretion and the rule to adopt a weak currency and promote export‐led growth to achieve output and inflation stabilization. This policy leads to reserve accumulation and is consistent with the behavior of China. When reserves are low initially, welfare is higher when the policymaker follows a rule.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12) Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1111/j.1467-9396.2009.00846.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:reviec:v:17:y:2009:i:4:p:802-823

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0965-7576

Access Statistics for this article

Review of International Economics is currently edited by E. Kwan Choi

More articles in Review of International Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-08-08
Handle: RePEc:bla:reviec:v:17:y:2009:i:4:p:802-823