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Hoarding of International Reserves: Mrs Machlup's Wardrobe and the Joneses
Author(s) -
Cheung YinWong,
Qian Xingwang
Publication year - 2009
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2009.00850.x
Subject(s) - keeping up with the joneses , hoarding (animal behavior) , stylized fact , economics , argument (complex analysis) , vulnerability (computing) , monetary economics , microeconomics , growth model , macroeconomics , computer science , ecology , biochemistry , chemistry , computer security , foraging , biology
Motivated by the observed international reserve hoarding behavior in the post‐1997 crisis period, we explore the Mrs Machlup's Wardrobe hypothesis and the related keeping up with the Joneses argument. It is conceived that, in addition to psychological reasons, holding a relatively high level of international reserves reduces the vulnerability to speculative attacks and promotes growth. A stylized model is constructed to illustrate this type of hoarding behavior. The relevance of the keeping up with the Joneses effect is examined using a few plausible empirical specifications and data from 10 East Asian economies. Panel‐based regression results are suggestive of the presence of the Joneses effect, especially in the post‐1997 crisis period.