NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Tractable Model of Precautionary Reserves, Net Foreign Assets, or Sovereign Wealth Funds

Christopher D. Carroll, Olivier Jeanne

NBER Working Paper No. 15228
Issued in August 2009
NBER Program(s):   AP   IFM

We model the motives for residents of a country to hold foreign assets, including the precautionary motive that has been omitted from much previous literature as intractable. Our model captures many of the principal insights from the existing specialized literature on the precautionary motive, deriving a convenient formula for the economy's target value of assets. The target is the level of assets that balances impatience, prudence, risk, intertemporal substitution, and the rate of return. We use the model to shed light on two topical questions: The "upstream'' flows of capital from developing countries to advanced countries, and the long-run impact of resorbing global financial imbalances.

download in pdf format
   (666 K)

email paper

This paper is available as PDF (666 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15228

Users who downloaded this paper also downloaded these:
Aizenman and Glick w14562 Sovereign Wealth Funds: Stylized Facts about their Determinants and Governance
Bernstein, Lerner, and Schoar w14861 The Investment Strategies of Sovereign Wealth Funds
Aizenman and Glick w16392 Asset Class Diversification and Delegation of Responsibilities between Central Banks and Sovereign Wealth Funds
Mendoza, Quadrini, and RĂ­os-Rull w12909 Financial Integration, Financial Deepness and Global Imbalances
Carroll and Toche w15265 A Tractable Model of Buffer Stock Saving
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us