Re: (none)

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

> No. What these statistics mean is that under a flexible exchange rate
regime
> there is a need for substantially more reserves than under a fixed
exchange
> regime.  And this was pointed out by Prof. Sidney Weintraub (of the Univ.
pf
> Texas) many years ago in an article published in the JOURNAL OF POST
KEYNESIAN
> ECONOMICS.

Comment:

At the IMF, the consensus in the 1970s was that, other things being equal,
the adoption of a flexible exchange rate instead of a fixed exchange rate
reduces the need for official reserves.

More recently, the same reasoning is reflected in the proposition that
countries such as Mexico, Russia, and Argentina have brought on themselves
massive devaluation through misguided attempts to support the exchange rates
of their currencies with (a) drawdown of their reserves, and (b) use of
foreign lines of credit, including IMF funds.

In other words, flexible exchange rates would have reduced the need for
reserves drawdown by these countries - and, hence, the need for reserves in
the first place.

Gunnar