New Strategies for Emerging Domestic Sovereign Bond Markets in the Global

B

il

li

on

s 

of

 U

S

 $

 

2000

2005

 

 

 

                                                      

18

 

This boom of reserves has prompted some academic authors to suggest new ways for using 

them in the most efficient way. Eichengreen, for example, suggested to explore pooling 

reserves in Latin America in order to use them for emergency lending in response to sudden 

stops or, more promisingly, to use a portion of the reserve pool, along with borrowed funds, to 

purchase contingent debt securities issued by Latin American governments and corporations 

(domestic currency inflation indexed bonds; GDP indexed bonds; commodity price indexed 

bonds). This would reduce, according to Eichengreen, their vulnerability to disturbances 

(Eichengreen, 2006). However, it is not clear how these kinds of schemes can function 

properly in practice as well-functioning institutional 

institutions for 

cross-border operations 

are missing.  A more realistic route is to adopt for each country a strategic asset and liability 

framework that would allow an integrated risk management approach to both assets (including 

reserves) and government liabilities (Blommestein, 2005).    

16

Global Economy Journal, Vol. 7 [2007], Iss. 2, Art. 2

http://www.bepress.com/gej/vol7/iss2/2

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G

RAPH 

9

 

C

ONTINUED

 

 Asia

0

50

100

150

200

250

Taiwan

Korea

India

Malaysia

Thailand

Indonesia

Philippines