Large uninsured risk, severe borrowing constraints, and rapid income growth can create excessively high household saving rates and large current account surpluses for emerging economies. Therefore, the massive foreign-reserve buildups by China are not necessarily the intended outcome of any government policies or an undervalued home currency, but instead a natural consequence of the country’s r...

The most oft-repeated remark one hears these days in Pakistan is: What good is this $12 billion of foreign reserves when the plight of the common man is not improving. A lot of so-called learned economists have also opined that this money should be spent by the Government on increasing expenditure for reducing poverty. This paper attempts to address these issues and clarify the confused thinkin...

In this paper we adopt a non linear approach to examine the dynamics of the international reserves holdings by the emerging economies. To do so, we estimate the demand for international reserves with a panel smooth transition model, that loosens two restricting hypotheses, homogeneity and time-stability. We find evidence for the presence of a non linear behavior in the demand for international ...

Currently, Eurodollars and fed funds markets combined trade about $220 billion in funds daily, the vast majority of which with overnight tenor. In this paper, we document several features of these wholesale unsecured dollar funding markets. Using daily confidential data on wholesale unsecured borrowing and reserve balances, we show that foreign banks, which make up most of the trading volumes i...