Asian Reserves and the Dollar: Is Gradual Adjustment Possible?

Abstract: Large dollar reserves in Asian EMEs accompany large U.S. fiscal and current account deficits. Analysis of strategic sales by Asian EMEs suggests that an attack on the dollar is not certain but is possible. A unique equilibrium where Asian EMEs sell their reserves does not exist but there are multiple Nash equilibria. Therefore action, which includes adjustment, is required to coordinate to the better equilibrium. There is evidence that more flexibility in Asian exchange rates will reduce risk for Asian EMEs, but the flexibility will have to be limited, and it depends on more flexibility in the renminbi. Moreover, limits to adjustment in wages put limits on realignments between US and Asian exchange rates. Therefore while a gradual adjustment strategy is feasible it will require both expenditure switching and expenditure reduction with the latter moderated by the maintenance of robust global growth. [Abstract Only] http://www.bepress.com/gej/vol5/iss3/3

Keywords: Asian EME; exchange rate; Nash equilibria; fiscal account deficit; reserves; fiscal adjustment; dollar; Economics; Money Market (search for similar items in EconPapers)
Date: 2005-11
Note: Working Papers
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.esocialsciences.org/Download/repecDownl ... s&AId=252&fref=repec

Related works:
Journal Article: Asian Reserves and the Dollar: Is Gradual Adjustment Possible? (2005)
Working Paper: Asian reserves and the dollar: Is gradual adjustment possible? (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ess:wpaper:id:252

Access Statistics for this paper

More papers in Working Papers from eSocialSciences
Bibliographic data for series maintained by Padma Prakash ().