Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/43247
Authors: 
Carroll, Christopher D.
Jeanne, Olivier
Year of Publication: 
2009
Series/Report no.: 
CFS Working Paper 2009/15
Abstract: 
We model the motives for residents of a country to hold foreign assets, including the precautionary motive that has been omitted from much previous literature as intractable. Our model captures many of the principal insights from the existing specialized literature on the precautionary motive, deriving a convenient formula for the economy's target value of assets. The target is the level of assets that balances impatience, prudence, risk, intertemporal substitution, and the rate of return. We use the model to shed light on two topical questions: The 'upstream' flows of capital from developing countries to advanced countries, and the long-run impact of resorbing global financial imbalances.
Subjects: 
Buffer Stock Saving
Net Foreign Assets
Sovereign Wealth Funds
Foreign Exchange Reserves
Small Open Economy Models
JEL: 
C61
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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