A tractable model of precautionary reserves, net foreign assets, or sovereign wealth funds

We model the motives for residents of a country to hold foreign assets, including the precautionary motive that has been omitted from much previous literature as intractable. Our model captures many of the principal insi
We model the motives for residents of a country to hold foreign assets, including the precautionary motive that has been omitted from much previous literature as intractable. Our model captures many of the principal insights from the existing specialized literature on the precautionary motive, deriving a convenient formula for the economy’s target value of assets. The target is the level of assets that balances impatience, prudence, risk, intertemporal substitution, and the rate of return. We use the model to shed light on two topical questions: The “upstream” flows of capital from developing countries to advanced countries, and the long-run impact of resorbing global financial imbalances. Keywords: Buffer Stock Saving, Net Foreign Assets, Sovereign Wealth Funds, Foreign Exchange Reserves, Small Open Economy Models
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Metadaten
Author:Christopher D. Carroll, Olivier Jeanne
URN:urn:nbn:de:hebis:30-68346
Parent Title (German):CFS working paper series ; 2009, 15
Series (Serial Number):CFS working paper series (2009, 15)
Document Type:Working Paper
Language:English
Date of Publication (online):2009/08/14
Year of first Publication:2009
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2009/08/14
Tag:Buffer Stock Saving ; Foreign Exchange Reserves ; Net Foreign Assets ; Small Open Economy Models; Sovereign Wealth Funds
HeBIS PPN:214928527
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:C61 Optimization Techniques; Programming Models; Dynamic Analysis
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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