Accumulation of Reserves and Keeping Up with the Joneses: The Case of Latam Economies
City University of Hong Kong - Department of Economics & Finance; University of California at Santa Cruz - Department of Economics
affiliation not provided to SSRN
August 31, 2010
HKIMR Working Paper No.21/2010
In this paper we explore the ‘Mrs. Machlup's Wardrobe’ hypothesis to understand the growing trend of Latin American economies amassing large stocks of international reserves. Using annual data from 1980 to 2007, we examine the relevance of the argument that economies continue to add to their existing reserves stock in order to keep up with the Joneses. We find strong evidence of presence of the Joneses effect. The effect is robust to the inclusion of traditional determinants of reserve accumulation as well as region specific factors including commodity exports that set the Latin American economies apart from other emerging economies.
Number of Pages in PDF File: 29
Keywords: Demand for International Reserves, ‘Mrs. Machlup’s Wardrobe’ Hypothesis, Speculative Attack, Competitive Hoarding, Financial Crisis
JEL Classification: F3, F4working papers series
Date posted: September 20, 2010
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