In the aftermath of the global financial crisis new patterns of reserve hoarding have emerged. This column identifies structural changes in international reserve accumulation. Emerging markets with higher savings rates tend to use higher buffers of reserves, partially accounting for the higher levels of reserves in east Asia compared to Latin America. While there is no end in sight for reserve hoarding, some of the newly identified factors may mitigate eventual reserve accumulation.
Joshua Aizenman, Yin-Wong Cheung, Hiro Ito, 13 September 2014
Matthieu Bussière, Gong Cheng, Menzie Chinn, Noëmie Lisack, 16 March 2014
The financial crisis that swept the global economy at the end of 2008 provides a natural experiment to test the proposition that international reserves are useful during crises. This column presents cross-country evidence based on a panel of 112 emerging and developing countries. Countries with more reserves relative to short-term debt fared better.
Guillermo Calvo, 27 October 2009
How did turmoil in the US subprime mortgage market ignite a global crisis? This column explains how emerging markets’ voracious appetite for international reserves coupled with record-low US policy interest rates and lax financial regulation to produce the large-scale creation of quasi-money subject to self-fulfilling-expectations runs. The theory suggests significant changes in Fed and regulatory policy are needed.
Joshua Aizenman, Sun Yi, 15 October 2009
Emerging markets accumulated massive international reserves over the last decade. This column explores how they used them to respond to the crisis. Economies that accumulated reserves for trade concerns drew them down in response to the shock, while economies driven by financial factors showed a “fear of depleting”.
Alan Taylor, 11 July 2008
Alan Taylor of the University of California Davis talks to Romesh Vaitilingam about the first era of globalisation and the policy lessons that researchers in economic history and international economics are drawing for contemporary experiences of financial market integration, trade liberalisation and the growth of international reserves. The interview was recorded at the American Economic Association meetings in New Orleans in January 2008.