Financial Versus Monetary Mercantilism: Long-Run View of Large International Reserves Hoarding
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Summary:
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.
Series:
Working Paper No. 2006/280
Subject:
Financial crises Financial sector International reserves Real exchange rates Reserves accumulation
English
Publication Date:
December 1, 2006
ISBN/ISSN:
9781451865400/1018-5941
Stock No:
WPIEA2006280
Pages:
22
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