Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/26110
Authors: 
Cheung, Yin-Wong
Qian, Xingwang
Year of Publication: 
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 Machlup’s 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

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