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ANALYSIS OF INTERNATIONAL RESERVE HOARDING IN KOREA
Author(s) -
JO GABJE
Publication year - 2011
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2011.00540.x
Subject(s) - hoarding (animal behavior) , economics , cointegration , mercantilism , context (archaeology) , financial crisis , international economics , exchange rate , macroeconomics , monetary economics , econometrics , market economy , foraging , ecology , paleontology , biology
Since the Asian financial crisis, Korea's accumulation of international reserves has substantially exceeded benchmark levels. The present paper examines the interaction between international reserve hoarding and mercantilist motives, in the context of Korea's policy of maintaining export competitiveness through exchange rate management. An estimation of cointegration and error correction has found that in both the long term and the short term, Korea has stockpiled reserves as a result of heightened concerns regarding export competitiveness. The short‐run dynamics entail precautionary motives that have contributed to reserve accumulation. A variance decomposition test suggests that the mercantilist motive has been the main driver of reserve accumulation.