Re: (none)

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

It seems that there is a confusion about the term flexible exchange rate.

A freely exchangable currency with a traget exchange rate requires more reserves
to hold the target.  If there is no target exchange rate, no reserves are needed,
as Gunnar points out.  The exchange rate would just follow
market forces, be they fundmental or speculative or manipulative.

The confusion arises when a currency claims to have a flexible exchange rate but
really only has a narrow flexible band, then more reserves are needed than a fixed
exchange rate because the exposure is indeterminate.

That is why The median Gross International Reserves as % of GDP is greater in 1995
than in 1970, the year prior to the abandoning of Bretton Woods in 1971.

Henry C.K. Liu

pdavidso wrote:

> >===== Original Message From g kohler <gktbg1@xxxxxxxxxx> =====
> >Leigh and Gunnar ? thanks for your interesting comments on Stiglitz, ?Global
> >Greenbacks?.
> >
> >Here is some pertinent statistical information:
> >(1) I checked Stiglitz?s figure of globally aggregated reserves, which he
> >gives as US $1.6 trillion.
> >Using World Bank data, I found a similar total of ?Gross International
> Reserves?
> > (year 1995, all countries, current US $) = US$ 1.7 trillion.
> >(2) Next, I compared 1995 with 1970 (not absolute figures, but reserves
> >as a percent of GDP)
> >The median Gross International Reserves as % of GDP (for all countries with
> >available data) are as follows:
> >Median (1970) =  4.3%
> >Median (1995) =  9.7%
> >That suggests that reserve requirements under the bastard-Keynesian
> international
> >regime (1970) were substantially lower than they are under the current global
> >bastard-neoliberal regime (1995).
>
> 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.
>
> Paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 523
> Knoxville, Tennessee 37996-0550
> phone # (865)974-4221; fax #(561)737-8262;
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html