{
  "title": "International Reserves: Precautionary vs. Mercantilist Views, Theory and Evidence",
  "publication": "IMF Working Papers, October 1, 2005",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/international-reserves-precautionary-vs-18597",
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  "summary": "This paper compares the importance of precautionary and mercantilist motives in the hoarding of international reserves by developing countries. Overall, empirical results support precautionary motives; in particular, a more liberal capital account regime increases international reserves.",
  "sections": [
    {
      "heading": "Summary and central findings",
      "content": "- The paper compares the importance of precautionary and mercantilist motives in the hoarding of international reserves by developing countries.\n- Overall, empirical results support precautionary motives.\n- A more liberal capital account regime increases international reserves."
    },
    {
      "heading": "Theoretical contributions",
      "content": "- Large precautionary demand for international reserves arises as a self-insurance to avoid costly liquidation of long-term projects when the economy is susceptible to sudden stops.\n- The welfare gain from the optimal management of international reserves is of a first-order magnitude, reducing the welfare cost of liquidity shocks from a first-order to a second-order magnitude."
    },
    {
      "heading": "Empirical implications and interpretation",
      "content": "- Empirical evidence in the paper points toward precautionary demand as a primary driver of reserves accumulation in developing countries.\n- Capital account liberalization is empirically associated with higher international reserves holdings."
    },
    {
      "heading": "Publication metadata and identifiers",
      "content": "- Authors: Joshua Aizenman, Jaewoo Lee\n- Publication date: October 1, 2005\n- Series: Working Paper No. 2005/198\n- Issue: 198\n- Volume: 2005\n- Pages: 30\n- DOI: https://doi.org/10.5089/9781451862171.001\n- Stock No: WPIEA2005198\n- ISBN: 9781451862171\n- ISSN: 1018-5941\n- Subject: Capital account liberalization, Export performance, International reserves, Liquidity, Reserves accumulation\n- Keywords: precautionary demand, WP\n- Citation example provided in source: Joshua Aizenman, and Jaewoo Lee. \"International Reserves: Precautionary vs. Mercantilist Views, Theory and Evidence\", IMF Working Papers 2005, 198 (2005), accessed 9/16/2026, https://doi.org/10.5089/9781451862171.001\n\nIMF Working Paper: International Reserves: Precautionary vs. Mercantilist Views, Theory and Evidence (Working Paper No. 2005/198).\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/international-reserves-precautionary-vs-18597"
    }
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    "Authors: Joshua Aizenman, Jaewoo Lee",
    "Published: October 1, 2005",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451862171.001",
    "The paper compares the importance of precautionary and mercantilist motives in the hoarding of international reserves by developing countries.",
    "Overall, empirical results support precautionary motives.",
    "A more liberal capital account regime increases international reserves.",
    "Large precautionary demand for international reserves arises as a self-insurance to avoid costly liquidation of long-term projects when the economy is susceptible to sudden stops.",
    "The welfare gain from the optimal management of international reserves is of a first-order magnitude, reducing the welfare cost of liquidity shocks from a first-order to a second-order magnitude.",
    "Empirical evidence in the paper points toward precautionary demand as a primary driver of reserves accumulation in developing countries.",
    "Capital account liberalization is empirically associated with higher international reserves holdings.",
    "Authors: Joshua Aizenman, Jaewoo Lee",
    "Publication date: October 1, 2005",
    "Series: Working Paper No. 2005/198",
    "Issue: 198",
    "Volume: 2005",
    "Pages: 30",
    "DOI: https://doi.org/10.5089/9781451862171.001",
    "Stock No: WPIEA2005198",
    "ISBN: 9781451862171",
    "ISSN: 1018-5941",
    "Subject: Capital account liberalization, Export performance, International reserves, Liquidity, Reserves accumulation",
    "Keywords: precautionary demand, WP",
    "Citation example provided in source: Joshua Aizenman, and Jaewoo Lee. \"International Reserves: Precautionary vs. Mercantilist Views, Theory and Evidence\", IMF Working Papers 2005, 198 (2005), accessed 9/16/2026, https://doi.org/10.5089/9781451862171.001"
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