The reasons For Hoarding International Reserves by Emerging Economies: an analysis on Brazil (2003-2018)

Abstract

This article aims to explore the reason why the Brazilian economy accumulated a large sum of international reserves throughout the first and second decades of this century. The first section presents three reasons for this policy, based on specialized economics literature: fear of floating, mercantilist, and precautionary. In sequence, the article analyses the Brazilian case in detail, revealing which of these reasons explains more adequately the buildup throughout the years 2003-2018. In this sense, the article explores primary data about the path of the international reserves in the period and other variables related to the countrys international relationships. The article concludes the ``precautionary'' reason is the best explanation for the policy of hoarding international reserves by Brazil.