The Korean Economic Review
Reserve Adequacy In Asia Revisited: New Benchmarks Based On The Size And Composition Of Capital Flow
Jung Sik Kim / Jie Li / Ramkishen S. Rajan / Ozan Sula / Thomas D. Willett Year 2007Vol. 23No. 1
There has been considerable debate about the rationale behind the reservehoarding by Asia, with wide ranging explanations has been offered for thisbehavior. In view of the ferocity and suddenness of the Asian crisis of 1997-98, the precautionary motive no doubt looms large in the decision to build upreserves to unprecedently high levels. This paper deals more narrowly withthe issues of additive coverage ratios that some of the central banks areusing and presenting new benchmarks for judging reserve adequacy basedon the behavior of different types of capital flows during currency crises.Alternative measures of the “size” of recent crises and their implications forlevels of reserve adequacy for a number of Asian countries today are alsoconsidered.