Publication:
Undervaluation through Foreign Reserve Accumulation : Static Losses, Dynamic Gains

dc.contributor.authorKorinek, Anton
dc.contributor.authorServén, Luis
dc.date.accessioned2012-03-19T18:38:54Z
dc.date.available2012-03-19T18:38:54Z
dc.date.issued2010-03-01
dc.description.abstractThis paper shows that real exchange rate undervaluation through the accumulation of foreign reserves may improve welfare in economies with learning-by-investing externalities that arise disproportionately from the tradable sector. In the presence of targeting problems or when policy choices are restricted by multilateral agreements, first-best policies such as subsidies to capital accumulation, or subsidies to tradable production are not feasible. A neo-mercantilist policy of foreign reserve accumulation "outsources" the targeting problem or overcomes the multilateral restrictions by providing loans to foreigners that can only be used to buy up domestic tradable goods. This raises the relative price of tradable versus non-tradable goods (i.e. undervalues the real exchange rate) at the static cost of temporarily reducing tradable absorption in the domestic economy. However, since the tradable sector generates greater learning-by-investing externalities, it leads to dynamic gains in the form of higher growth. The net welfare effects of reserve accumulation depend on the balance between the static losses from lower tradable absorption versus the dynamic gains from higher growth.en
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100325103944
dc.identifier.doi10.1596/1813-9450-5250
dc.identifier.urihttps://hdl.handle.net/10986/3737
dc.languageEnglish
dc.publisherWashington, DC: World Bank
dc.relation.ispartofseriesPolicy Research Working Paper ; No. 5250
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectABSOLUTE VALUE
dc.subjectACCUMULATION OF CAPITAL
dc.subjectADVERSE SHOCKS
dc.subjectAGENCY PROBLEM
dc.subjectAGENCY PROBLEMS
dc.subjectAGGREGATE CAPITAL STOCK
dc.subjectALLOCATION OF CAPITAL
dc.subjectAMOUNT OF CAPITAL
dc.subjectBENCHMARK
dc.subjectBUDGET CONSTRAINT
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL ACCOUNT OPENNESS
dc.subjectCAPITAL ACCOUNT RESTRICTIONS
dc.subjectCAPITAL ACCOUNTS
dc.subjectCAPITAL ACCUMULATION
dc.subjectCAPITAL ALLOCATION
dc.subjectCAPITAL FLIGHT
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL FORMATION
dc.subjectCAPITAL INCOME
dc.subjectCAPITAL INFLOW
dc.subjectCAPITAL INFLOWS
dc.subjectCAPITAL INVESTMENT
dc.subjectCAPITAL MARKET
dc.subjectCAPITAL MARKETS
dc.subjectCAPITAL OUTFLOW
dc.subjectCAPITAL OWNERS
dc.subjectCAPITAL SHARE
dc.subjectCAPITAL SHARES
dc.subjectCAPITAL STOCK
dc.subjectCLOSED CAPITAL ACCOUNTS
dc.subjectCLOSED ECONOMY
dc.subjectCOMPARATIVE ADVANTAGE
dc.subjectCONSUMERS
dc.subjectCONSUMPTION GROWTH
dc.subjectCOST OF INVESTMENT
dc.subjectCRRA
dc.subjectCURRENCY
dc.subjectCURRENT ACCOUNT
dc.subjectCURRENT ACCOUNT BALANCE
dc.subjectCURRENT ACCOUNT DEFICITS
dc.subjectCURRENT ACCOUNT SURPLUS
dc.subjectDEPRECIATION
dc.subjectDEPRECIATION RATE
dc.subjectDEVALUATION
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDIFFERENTIAL TAXATION
dc.subjectDISCOUNTED VALUE
dc.subjectDISTORTION
dc.subjectDISTORTIONS
dc.subjectDOMESTIC CAPITAL
dc.subjectDOMESTIC CONSUMPTION
dc.subjectDOMESTIC CURRENCY
dc.subjectDOMESTIC ECONOMY
dc.subjectDOMESTIC INTEREST RATE
dc.subjectDOMESTIC INTEREST RATES
dc.subjectDOMESTIC PRICE
dc.subjectDUTCH DISEASE
dc.subjectECONOMIC DEVELOPMENT
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC IMPLICATIONS
dc.subjectELASTICITY
dc.subjectELASTICITY OF SUBSTITUTION
dc.subjectEMERGING ECONOMIES
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET COUNTRIES
dc.subjectEQUILIBRIA
dc.subjectEQUILIBRIUM
dc.subjectEQUILIBRIUM CONDITION
dc.subjectEQUILIBRIUM CONDITIONS
dc.subjectEXCHANGE RATE DEVALUATION
dc.subjectEXPENDITURE
dc.subjectEXPENDITURES
dc.subjectEXPORT SUBSIDIES
dc.subjectEXPORT SUBSIDY
dc.subjectEXTERNALITIES
dc.subjectEXTERNALITY
dc.subjectFACTOR MARKETS
dc.subjectFAIR TRADE
dc.subjectFINANCIAL ASSETS
dc.subjectFINANCIAL SUPPORT
dc.subjectFISCAL POLICY
dc.subjectFOREIGN DIRECT INVESTMENT
dc.subjectFOREIGN INTEREST
dc.subjectFOREIGN INTEREST RATES
dc.subjectFOREIGN INVESTMENT
dc.subjectFOREIGN RESERVE
dc.subjectFOREIGN RESERVES
dc.subjectFRAUD
dc.subjectFREE TRADE
dc.subjectGDP
dc.subjectGENERAL EQUILIBRIUM
dc.subjectGENERAL EQUILIBRIUM MODELS
dc.subjectGLOBAL ECONOMY
dc.subjectGOVERNMENT EXPENDITURE
dc.subjectGOVERNMENT FINANCES
dc.subjectGOVERNMENT INTERVENTION
dc.subjectGOVERNMENT INVESTMENT
dc.subjectGOVERNMENT POLICIES
dc.subjectGOVERNMENT POLICY
dc.subjectGOVERNMENT REVENUE
dc.subjectGOVERNMENT SPENDING
dc.subjectGROWTH MODELS
dc.subjectGROWTH RATE
dc.subjectGROWTH RATES
dc.subjectHOLDING
dc.subjectHOLDINGS
dc.subjectHUMAN CAPITAL
dc.subjectIMPORT
dc.subjectIMPORT TARIFF
dc.subjectIMPORT TARIFFS
dc.subjectIMPORTS
dc.subjectINCOME
dc.subjectINCOME EFFECT
dc.subjectINCREASING RETURNS
dc.subjectINCREASING RETURNS TO SCALE
dc.subjectINDIFFERENCE CURVES
dc.subjectINFANT INDUSTRY ARGUMENT
dc.subjectINFLATION
dc.subjectINSTITUTIONAL CAPACITIES
dc.subjectINSTITUTIONAL CAPACITY
dc.subjectINSTRUMENT
dc.subjectINSURANCE
dc.subjectINTANGIBLE
dc.subjectINTEREST INCOME
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL ECONOMICS
dc.subjectINTERNATIONAL INTEREST
dc.subjectINTERNATIONAL INTEREST RATE
dc.subjectINTERNATIONAL PRICE
dc.subjectINTERNATIONAL TRADE
dc.subjectINVESTING
dc.subjectINVESTMENT EXPENDITURES
dc.subjectINVESTMENT OPPORTUNITIES
dc.subjectINVESTMENT RATE
dc.subjectLABOR MARKET
dc.subjectLDCS
dc.subjectLEVEL OF INVESTMENT
dc.subjectLEVIES
dc.subjectMACROECONOMICS
dc.subjectMARGINAL PRODUCT
dc.subjectMARGINAL PRODUCTIVITY
dc.subjectMARKET CONDITION
dc.subjectMARKET EQUILIBRIUM
dc.subjectMARKET INTEREST RATE
dc.subjectMARKET POWER
dc.subjectMARKET PRICE
dc.subjectMARKET PRICES
dc.subjectMERCANTILISM
dc.subjectMONEY HOLDINGS
dc.subjectMULTILATERAL TRADE
dc.subjectNATURAL RESOURCE
dc.subjectNATURAL RESOURCES
dc.subjectNEGATIVE EXTERNALITIES
dc.subjectNET EXPORTS
dc.subjectNOMINAL EXCHANGE RATE
dc.subjectOPEN ECONOMY
dc.subjectOPTIMAL ALLOCATION
dc.subjectOPTIMIZATION
dc.subjectORGANIZATIONAL CAPITAL
dc.subjectPOLICY RESPONSES
dc.subjectPOLITICAL ECONOMY
dc.subjectPREVAILING MARKET PRICES
dc.subjectPRIVATE CAPITAL
dc.subjectPRIVATE CAPITAL STOCK
dc.subjectPRIVATE INVESTMENT
dc.subjectPRIVATE INVESTMENTS
dc.subjectPRODUCTION FUNCTION
dc.subjectPRODUCTION FUNCTIONS
dc.subjectPRODUCTIVE INVESTMENT
dc.subjectPRODUCTIVITY
dc.subjectPRODUCTIVITY GROWTH
dc.subjectPROFIT MAXIMIZATION
dc.subjectPUBLIC GOOD
dc.subjectPUBLIC INVESTMENT
dc.subjectPUBLIC ¯ SPENDING
dc.subjectRATE OF RETURN
dc.subjectRATES OF RETURN
dc.subjectREAL COST
dc.subjectREAL EXCHANGE RATE
dc.subjectRELATIVE PRICE
dc.subjectRELATIVE WEIGHTS
dc.subjectRESERVE
dc.subjectRESERVE ACCUMULATION
dc.subjectRESERVES
dc.subjectRETURN
dc.subjectSAVINGS RATE
dc.subjectSAVINGS RATES
dc.subjectSEIGNIORAGE
dc.subjectSLOW GROWTH
dc.subjectSPECULATIVE CAPITAL INFLOWS
dc.subjectSTEADY STATE
dc.subjectSUBSTITUTION EFFECT
dc.subjectSUPPLY OF CREDIT
dc.subjectTAX
dc.subjectTAX CREDIT
dc.subjectTAX POLICY
dc.subjectTAX RATE
dc.subjectTAX RATES
dc.subjectTAXATION
dc.subjectTOTAL OUTPUT
dc.subjectTRADABLE GOOD
dc.subjectTRADABLE GOODS
dc.subjectTRADE AGREEMENTS
dc.subjectTRADE DEFICIT
dc.subjectTRADE POLICY
dc.subjectUNDERVALUATION
dc.subjectUTILITY FUNCTION
dc.subjectWAGES
dc.subjectWORLD ECONOMY
dc.subjectWORLD INTEREST RATE
dc.subjectWORLD MARKET
dc.subjectWTO
dc.titleUndervaluation through Foreign Reserve Accumulation : Static Losses, Dynamic Gainsen
dspace.entity.typePublication
okr.crossref.titleUndervaluation Through Foreign Reserve Accumulation : Static Losses, Dynamic Gains
okr.date.doiregistration2025-04-10T11:53:37.613894Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20100325103944
okr.guid451371468155134764
okr.identifier.doi10.1596/1813-9450-5250
okr.identifier.externaldocumentum000158349_20100325103944
okr.identifier.internaldocumentum11995983
okr.identifier.reportWPS5250
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2010/03/25/000158349_20100325103944/Rendered/PDF/WPS5250.pdfen
okr.sectorPublic Administration, Law, and Justice :: Central government administration
okr.themeEconomic management :: Analysis of economic growth
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublication2c4139d2-7458-5296-9aea-6d3db3e1ae1e
relation.isAuthorOfPublication.latestForDiscovery2c4139d2-7458-5296-9aea-6d3db3e1ae1e
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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