TY  - JOUR
AU  - Carroll,Christopher D.
AU  - Jeanne,Olivier
TI  - A Tractable Model of Precautionary Reserves, Net Foreign Assets, or Sovereign Wealth Funds
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15228
PY  - 2009
Y2  - August 2009
UR  - http://www.nber.org/papers/w15228
L1  - http://www.nber.org/papers/w15228.pdf
N1  - Author contact info:
Christopher D. Carroll
Department of Economics
Mergenthaler 440
Johns Hopkins University
Baltimore, MD 21218
Tel: 410/516-7602
Fax: 410/516-7600
E-Mail: ccarroll@jhu.edu

Olivier Jeanne
Department of Economics
Johns Hopkins University
454 Mergenthaler Hall
3400 N. Charles Street
Baltimore, MD 21218
Tel: 410/516-7604
Fax: 410/516-7600
E-Mail: ojeanne@jhu.edu
AB  - 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.
ER  -