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

Joshua Aizenman and Jaewoo Lee

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

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.

Keywords: Mercantilism; cost of capital; competitive real depreciations; self insurance; precautionary hoarding (search for similar items in EconPapers)
Date: 2007-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.escholarship.org/uc/item/5r95t1xf.pdf;origin=repeccitec (application/pdf)

Related works:
Journal Article: Financial versus Monetary Mercantilism: Long‐run View of Large International Reserves Hoarding (2008)
Working Paper: Financial Versus Monetary Mercantilism: Long-Run View of Large International Reserves Hoarding (2006)
Working Paper: Financial Versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding (2006)
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:cdl:ucscec:qt5r95t1xf

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().