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

Jaewoo Lee and Joshua Aizenman

No 2006/280, IMF Working Papers from International Monetary Fund

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 a precautionary response to the heritage of past financial mercantilism. Monetary mercantilism also lowers the cost of hoarding through its short-term boost to external competitiveness, but may be associated with negative externalities leading to competitive hoarding.

Keywords: WP; mercantilism; monetary mercantilism; reserve; financial mercantilism (search for similar items in EconPapers)
Pages: 22
Date: 2006-12-01
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Citations: View citations in EconPapers (38)

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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 (2007)
Working Paper: Financial Versus Monetary Mercantilism-Long-run View of Large International Reserves Hoarding (2006)
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