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Empirical analysis does not suggest that reserves are "too high" in the majority of Asian countries, though China may be a special case. Much of the reserve increase in Asia can be explained by an optimal insurance model under which reserves provide a steady source of liquidity to cushion the impact of a sudden stop in capital inflows on output and consumption. Moreover, the benefits of reserves in terms of reduced spreads on privately held external debt further explains the observed growth in reserves since 1997-98. Using threshold estimation techniques, the paper shows that most of Asia can still benefit from higher reserves in terms of reduced borrowing costs.

Foreign exchange administration --- Foreign exchange --- Capital movements --- Capital flight --- Capital flows --- Capital inflow --- Capital outflow --- Flight of capital --- Flow of capital --- Movements of capital --- Cambistry --- Currency exchange --- Exchange, Foreign --- Foreign currency --- Foreign exchange problem --- Foreign money --- Forex --- FX (Finance) --- International exchange --- Balance of payments --- International finance --- Currency crises --- Banks and Banking --- Exports and Imports --- International Investment --- Long-term Capital Movements --- Monetary Policy --- International Lending and Debt Problems --- International economics --- Banking --- Sudden stops --- External debt --- Reserves accumulation --- International reserves --- Foreign exchange reserves --- Debts, External --- Taiwan Province of China

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There has been little systematic empirical study on the relationship between remittances and growth. This paper attempts to examine this relationship. Using a newly constructed crosscountry of data series for remittances covering a large sample of developing countries, we relate the interaction between remittances and financial development and its impact on growth. We analyze how a country's capacity to use remittances and its effectiveness in doing so might be influenced by local financial sector conditions. Given the difficulty of borrowing in developing countries, we explore the hypothesis that remittances can substitute for a lack of financial development and hence promote growth. The empirical analysis shows that remittances can promote growth in less financially developed countries. This relationship controls for the endogeneity of remittances and financial development using a Generalized Method of Moments (GMM) approach, does not depend on the particular measure of financial sector development used, and is robust to a number of sensitivity tests.

Economic development. --- Electronic books. -- local. --- Emigrant remittances. --- Banks and Banking --- Exports and Imports --- Finance: General --- Money and Monetary Policy --- Statistics --- Remittances --- Financial Markets and the Macroeconomy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Current Account Adjustment --- Short-term Capital Movements --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- International economics --- Finance --- Monetary economics --- Econometrics & economic statistics --- Banking --- Financial sector development --- Credit --- Balance of payments statistics --- Commercial banks --- International finance --- Financial services industry --- Balance of payments --- Banks and banking --- China, People's Republic of

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This paper creates the first dataset of bilateral remittance flows for a limited set of developing countries and estimates a gravity model for workers' remittances. We find that most of the variation in bilateral remittance flows can be explained by a few gravity variables. The evidence on the motives to remit is mixed, but altruism may be less of a factor than commonly believed. Most strikingly, remittances do not seem to increase in the wake of a natural disaster and appear aligned with the business cycle in the home country, suggesting that remittances may not play a major role in limiting vulnerability to shocks. To encourage remittances and maximize their economic impact, policies should be directed at reducing transaction costs, promoting financial sector development, and improving the business climate.

Emigrant remittances --- Capital movements --- Econometric models. --- Capital flight --- Capital flows --- Capital inflow --- Capital outflow --- Flight of capital --- Flow of capital --- Movements of capital --- Immigrant remittances --- Remittances, Emigrant --- Balance of payments --- Foreign exchange --- International finance --- Exports and Imports --- Foreign Exchange --- Natural Disasters --- Remittances --- Current Account Adjustment --- Short-term Capital Movements --- Climate --- Natural Disasters and Their Management --- Global Warming --- International economics --- Currency --- Natural disasters --- Multiple currency practices --- Current account --- Outward remittances --- Bangladesh