This paper investigates empirically the relationship between the pattern of fiscal policy and the demand for international reserves in developing countries, and how this relationship is associated with political risk and conditional access to global capital markets. It finds evidence that for...

If emerging markets are to achieve their objective of joining the ranks of industrialized, developed countries, they must use their economic and political influence to support radical change in the international financial system. This working paper recommends John Maynard Keynes's "clearing...