Precautionary Reserve Holdings in Asia: Examining the Case for a Regional Reserve Pool

摘要

The management of East Asian currencies changed after the regional crisis in 1997. One such change was that the East Asian economies now hold about two-thirds of the world's foreign exchange reserves. This paper examines the precautionary motives behind reserve accumulation. Holding such large volumes of reserves is costly but it also suggests that the regional economies have the capacity to develop a common reserve pool arrangement. The discussion is placed within the context of the ongoing imbalances that plague the global economy.