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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper ; No. 2009/15

Classification and Topics

• Classification: Wirtschaft ; Optimization Techniques; Programming Models; Dynamic Analysis
• Subject: Buffer Stock Saving ; Net Foreign Assets ; Sovereign Wealth Funds ; Foreign Exchange Reserves ; Small Open Economy Models ; Sparen ; Kassenhaltungsansatz ; Auslandsvermögen ; Währungsreserven ; Staatsfonds ; Kleines-offenes-Land ; Theorie ; Nord-Süd-Beziehungen ; Kapitalmobilität ; Welt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Carroll, Christopher D. ; Jeanne, Olivier
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/43247
• URN: urn:nbn:de:hebis:30-68346
• Last update: 10.03.2025, 11:43 AM CET