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Title:Financial versus monetary mercantilism: Long-run view of large international reserves hoarding PDF Logo
Authors:Aizenman, Joshua
Lee, Jaewoo
Issue Date:2007
Series/Report no.:Working Papers, Santa Cruz Center for International Economics 06-15
Abstract:The sizable hoarding of international reserves by several East Asian countries has been frequently attributed to a modern version of monetary mercantilism hoarding international reserves in order to improve competitiveness. From a long-run perspective, manufacturing exporters in East Asia adopted financial mercantilismsubsidizing the cost of capital during decades of high growth. They switched to hoarding large international reserves when growth faltered, making it harder to disentangle the monetary mercantilism from precautionary response to the heritage of past financial mercantilism. Monetary mercantilism also lowers the cost of hoarding, but may be associated with negative externalities leading to competitive hoarding.
Subjects:mercantilism
cost of capital
competitive real depreciations
self insurance
precautionary hoarding
JEL:F15
F31
F43
Document Type:Working Paper
Appears in Collections:Working Papers, Santa Cruz Institute for International Economics, UC Santa Cruz

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