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The Demand for International Reserves: A Cross-Sectional Study of a Group of Latin American Countries

Published online by Cambridge University Press:  02 January 2018

Lanny E. Streeter  and
Ramon Pablo Guerrero Ortiz
Lanny E. Streeter
Affiliation:
Department of Economics, University of Miami, Coral Gables, Florida
Ramon Pablo Guerrero Ortiz
Affiliation:
Department of Economics, University of Miami, Coral Gables, Florida
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Extract

In today's international monetary system, a country's stock of international reserves plays a critical role in determining the nature and the extent to which it can successfully pursue policies to promote growth, development, and stability. If its reserves are insufficient, the country will generally have to sacrifice some internal economic goals, instituting policies which tend to deflate the domestic economy and to discourage international trade. Excessive reserves, on the other hand, may impart an inflationary bias on the economy; and at the same time, superfluous reserves may be a costly way of tying up national wealth, especially for poorer nations. Since the “right” amount of reserves will differ from one nation to another, it is important to understand those factors which determine the amount of reserves which a country is willing and able to hold at a particular time.

Type
Research Article
Information
Journal of Interamerican Studies and World Affairs , Volume 15 , Issue 4 , November 1973 , pp. 432 - 453
Copyright
Copyright © University of Miami 1973

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