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International Reserves, Effective Demand and Growth

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  • Moritz Cruz
  • Peter Kriesler

Abstract

During the last decade, developing (and some developed) economies have accumulated large amounts of international reserves, mainly for precautionary reasons. This phenomenon has been coupled with insufficient economic growth. The resources being amassed largely overwhelm protective needs, there is an excess of resources that is being wasted, and which could be utilised for alternative productive projects, namely to promote growth. If insufficient aggregate demand can largely explain low growth, it is clear that this excess of international reserves can be used to stimulate aggregate demand. This paper argues that the excess of international reserves represents a potential resource to boost growth.

Suggested Citation

  • Moritz Cruz & Peter Kriesler, 2010. "International Reserves, Effective Demand and Growth," Review of Political Economy, Taylor & Francis Journals, vol. 22(4), pages 569-587.
    • Handle: RePEc:taf:revpoe:v:22:y:2010:i:4:p:569-587
    DOI: 10.1080/09538259.2010.510318
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