Reserve Policies of Central Banks and Their Implications for U.S. Balance of Payments Policy
Abstract
Under the gold-exchange standard, national currencies have supplemented gold as an international means of payment. The extent to which the fiduciary component of international reserves can be expanded depends on the reserve policies of central banks. Investigation of these policies is essential in assessing the adequacy of international reserves and the urgency of reducing the U.S. balance of payments deficit. Therefore, in this paper, we extend and test Kenen's model on reserve policies of central banks [4] and show its implications for U.S. balance of payments policy.'
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