@techreport{NBERw10534,
 title = "International Reserves Management and Capital Mobility in a Volatile World: Policy Considerations and a Case Study of Korea",
 author = "Joshua Aizenman and Yeonho Lee and Yeongseop Rhee",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "10534",
 year = "2004",
 month = "June",
 URL = "http://www.nber.org/papers/w10534",
 abstract = {This paper characterizes the precautionary demand for international reserves driven by the attempt to reduce the incidence of costly output decline induced by sudden reversal of short-term capital flows. It validates the main predictions of the precautionary approach by investigating changes in the patterns of international reserves in Korea in the aftermath of the 1997-8 crisis. This crisis provides an interesting case study, especially because of the rapid rise in Korea's financial integration in the aftermath of the East-Asian crisis, where foreigners' shareholding has increased to 40% of total Korean market capitalization. We show that the crisis led to structural change in the hoarding of international reserves, and that the Korean monetary authority gives much greater attention to a broader notion of 'hot money,' inclusive of short-term debt and foreigners' shareholding.},
}