Reserve needs of individual countries and country groups

  • J. A. H. de Beaufort Wijnholds
Part of the Publication of the Netherlands Institute of Bankers and Stock Brokers book series (PIBS, volume 31)


The first and foremost distinction to be made is that of the need for reserves of individual countries under stable exchange rates and under flexible exchange rates. Both the aspects of the level and growth of reserves are discussed in the context of these two categories of exchange rate regimes. Attention is also given to reserve need problems connected with capital movements. Although the need for reserves is first treated from the point of view of individual countries in general, the specific reserve needs of certain categories of countries (reserve currency countries, open economies, developing countries, and oil exporting countries) are also discussed.


Exchange Rate Adjustment Cost Exchange Rate Regime Flexible Exchange Rate Closed Economy 
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  1. 2.
    Cf. pp. 88, 89 above.Google Scholar
  2. 2.
    Article IV, Section 5(a) of the Articles of Agreement of the IMF state that countries shall not propose changes in the par values of their currencies except to correct a fundamental disequilibrium. In the proposed second amendment of the Articles this concept is no longer mentioned, however.Google Scholar
  3. 1.
    It is a well-known phenomenon that exchange rate changes take considerable time to have their full effects, and that they initially tend to produce perverse balance of payments effects; cf., for instance, Helen B. Junz and Rudolf R. Rhomberg, “Price Competitiveness in Export Trade among Industrial Countries”, American Economic Review, May 1973.Google Scholar
  4. 1.
    Cf. sections iii and iv of chapter 4.Google Scholar
  5. 1.
    For instance, in order to take into account the effects of a certain degree of liquidity creation which will be very hard to avoid under inflationary conditions (cf. p. 47 above).Google Scholar
  6. 2.
    The marginal propensity to import can be defined so as to include services beside merchandise imports. Johnson included securities along with goods and services in his version of the monetary approach; cf. p. 52 above. Under Holtrop’s approach capital flows could in principle also be included.Google Scholar
  7. 1.
    Cf. pp. 99–101 above.Google Scholar
  8. 2.
    Cf. p. 105 above.Google Scholar
  9. 1.
    The need for reserves of open economies is discussed in section ix of this chapter.Google Scholar
  10. 2.
    Cf. p. 105 above.Google Scholar
  11. 1.
    Cf. pp. 107, 108 above.Google Scholar
  12. 1.
    Some of the views expressed here were previously set out in an article by the author; cf. J.A.H. de Beaufort Wijnholds, “The Need for Reserves Under Full and Limited Flexibility of Exchange Rates”, De Economist, No. 3, 1974.Google Scholar
  13. 1.
    Cf. section i of chapter 7.Google Scholar
  14. 1.
    The situation is the same as that depicted in figure 5 on p. 179 above.Google Scholar
  15. 1.
    Cf. pp. 104, 105 above.Google Scholar
  16. 2.
    Cf. p. 100 above.Google Scholar
  17. 3.
    Cf. pp. 166–170 above.Google Scholar
  18. 1.
    An indication of the marginal productivity of capital in individual developing countries may be obtained by comparing the (macro) economic rate of return as calculated by such institutions as the World Bank for the various projects they help to finance. For the methods used in such calculations cf., for instance, Deepak Lai, Methods of Project Analysis: A Review, World Bank Staff Occasional Papers No. 16, Baltimore, 1974.Google Scholar
  19. 1.
    Cf., for instance, the argumentation by Cohen, pp. 142, 143 above. A rough quantitative indication may be provided by the greater instability of export receipts of developing countries as compared to industrialized countries. In a joint IMF/World Bank study it was shown that for the period 1950–1965 the average fluctuations in export earnings of the developing countries was about twice as large as those of the industrialized countries; cf. The Problem of Stabilization of Prices of Primary Products, Washington, 1969, pp. 40–42. This result is roughly confirmed for more recent years by IMF data.Google Scholar

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© Springer Science+Business Media New York 1977

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  • J. A. H. de Beaufort Wijnholds

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