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Financial Versus Monetary Mercantilism: Long-Run View of Large International Reserves Hoarding
Author:
Mr. Jaewoo Lee
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and
Mr. Joshua Aizenman null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2006: Issue 280
Language:
English
Publication Date:
01 Dec 2006
DOI:
https://doi.org/10.5089/9781451865400.001
ISBN:
9781451865400
ISSN:
1018-5941
Pages:
22
Keywords:
WP; mercantilism; monetary mercantilism; reserve; financial mercantilism
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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 mercantilism-subsidizing 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 a precautionary response to the heritage of past financial mercantilism. Monetary mercantilism also lowers the cost of hoarding through its short-term boost to external competitiveness, but may be associated with negative externalities leading to competitive hoarding.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund