Precaution versus mercantilism: Reserve accumulation, capital controls, and the real exchange rate

• 成果类型: Article
• 署名作者: Choi, Woo Jin; Taylor, Alan M.
• 署名单位: Korea Development Institute (KDI); University of California System; University of California Davis; National Bureau of Economic Research; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2022.103649
• 发表日期: 2022
• 关键词: International reserves; capital controls; Real exchange rates; TRADE; Economic growth

摘要

We document a new international stylized fact on the relationship between external wealth, capital controls, and the real exchange rate. We first re-confirm that the real exchange rate ap-preciates when external asset holdings increase, all else equal, a central mechanism in interna-tional economics. However, we find that increases in publicly held external assets (reserves) are associated with depreciation, especially if combined with high capital controls. Reserve ac-cumulation is also associated with a larger trade surplus, and higher GDP and TFP growth, in countries with high capital controls. The results hold using an instrumental variable for re-serves based on commodity export surrender requirements. A simple rationale is presented to account for the new fact: combined reserves and capital controls can affect trade balances via undervaluation (mercantilist motive), while reserve increases without controls can insure against crises (precautionary motive) independently of real exchange rates.(c) 2022 Elsevier B.V. All rights reserved.