Accumulation of reserves in emerging and developing countries: mercantilism versus insurance

Luis Cabezas () and Jose De Gregorio
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Luis Cabezas: Central Bank of Chile

Review of World Economics (Weltwirtschaftliches Archiv), 2019, vol. 155, issue 4, No 7, 819-857

Abstract: Abstract Motivated by the significant increases in international reserves during the 2000s, this paper analyzes the reasons why emerging and developing countries choose to accumulate them. In addition to a traditional measure of mercantilism, we add the terms of trade, and the speculation-deterrent motive. The results show that the mercantilist motive was a significant factor behind the massive accumulation of reserves before the global financial crisis, and it was almost as important as the precautionary motive. It is shown that commodity-exporting countries increased reserves for a fundamentally mercantilist motive. Finally, the speculation-deterrent motive was also an important factor during the 2000s.

Keywords: International reserves; Mercantilism; Precaution; Self-insurance (search for similar items in EconPapers)
JEL-codes: F21 F3 F30 F31 F36 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s10290-019-00353-2

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