Reserves and Risk: Evidence from China

40 Pages Posted: 1 Jun 2020

See all articles by Rasmus Fatum

Rasmus Fatum

University of Alberta - Department of Marketing, Business Economics & Law

Takahiro Hattori

University of Tokyo - Graduate School of Public Policy

Yohei Yamamoto

Hitotsubashi University; Tokyo Center for Economic Research (TCER)

Date Written: May, 2020

Abstract

We consider if the Chinese accumulation of reserves is associated with unintended consequences in the form of increased private sector risk taking. Using sovereign credit default swap spreads and stock index prices as indicators of risk taking, we provide evidence to suggest that as reserve holdings increase, so does the willingness of the private sector to take on more risk. This is an important finding that adds credence to the suggestion that insurance through costly reserves, to be used in the event of a crisis, may lead to private sector actions that in and of themselves make it more likely that this insurance will be used.

Keywords: International reserves, risk taking, China

JEL Classification: F31, G15

Suggested Citation

Fatum, Rasmus and Hattori, Takahiro and Yamamoto, Yohei, Reserves and Risk: Evidence from China (May, 2020). Globalization and Monetary Policy Institute Working Paper No. 387, Available at SSRN: https://ssrn.com/abstract=3614208 or http://dx.doi.org/10.24149/gwp387

Rasmus Fatum (Contact Author)

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada
780-492-3951 (Phone)
780-492-3325 (Fax)

HOME PAGE: http://www.bus.ualberta.ca/rfatum

Takahiro Hattori

University of Tokyo - Graduate School of Public Policy ( email )

Tokyo
Japan

Yohei Yamamoto

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

Tokyo Center for Economic Research (TCER) ( email )

Sankyo Building
Room 703, Main Building
Chiyoda-ku, Tokyo, 1-7-10
Japan

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