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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26110
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| Title: | | Hoarding of international reserves: Mrs Machlup's wardrobe and the joneses  |
| Authors: | | Cheung, Yin-Wong Qian, Xingwang |
| Issue Date: | | 2007 |
| Series/Report no.: | | CESifo working paper 2065 |
| Abstract: | | Motivated by the observed international reserve hoarding behavior in the post-1997 crisis period, we explore the Mrs Machlups wardrobe hypothesis and the related keeping up with the Joneses argument. It is conceived that, in addition to psychological reasons, holding a relatively high level of international reserves reduces the vulnerability to speculative attacks and promotes growth. A stylized model is constructed to illustrate this type of hoarding behavior. The relevance of the keeping up with the Joneses effect is examined using a few plausible empirical specifications and data from 10 East Asian economies. Panel-based regression results are suggestive of the presence of the Joneses effect; especially in the post-1997 crisis period. Individual economy estimation results, however, show that the Joneses effect varies across economies. |
| JEL: | | F3 F4 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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