The Demand For International Reserves.
This article focuses on the government's demand for international reserves. Reserve holdings can be regarded as resulting from explicit policy decisions. The specification of alternative means of handling payment imbalances yields a demand function which depends on the relative benefits and costs of...
| Publicado en: | American Economic Review Vol. 60; no. 4; pp. 655 - 668 |
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| Autor principal: | |
| Formato: | Artículo |
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American Economic Association
Sep70
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| Acceso en línea: | Ver este registro en EBSCOhost |
| Sumario: | This article focuses on the government's demand for international reserves. Reserve holdings can be regarded as resulting from explicit policy decisions. The specification of alternative means of handling payment imbalances yields a demand function which depends on the relative benefits and costs of the alternatives. Section 1 of this paper presents a model yielding an optimal level of reserves for a government attempting to maintain external and internal balance under a regime of pegged exchange rates. The government maximizes utility subject to the trade-off between lower income levels implicit in large reserve holdings and greater income fluctuations generated by exogenous external disturbances which cannot be neutralized when reserve holdings are small. The model was tested on a group of 46 countries over the period 1953 to 1965; the results are presented in section 2. The final section considers the implications of the study for international monetary reform. |
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