accumulation of reserves may have actually contributed to the current economic crisis, by facilitating the formation of massive global economic imbalances. High savings rates in Asia, for example, enabled western countries to run continuous current account deficits. Now, the chickens are coming home to roost, and developing economies are once again finding themselves vulnerable to recession, since their forex reserve policies came at the expense of developing domestic economic bases. The Times of India reports:
Re-balancing means that Asian countries must stop piling up ever-rising forex reserves (and trade surpluses). Such reserves represent excessive saving, excessive exports and insufficient imports.
Read More: High forex reserves can worsen recession
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