Abstract
The major purpose of this paper is to determine the optimal investing path and the stock level of international reserves by applying dynamic optimization approach on analyzing the investment behavior so that the total returns are maximized. It constructs an international reserves investing plan (lRIP) model that provides an attention to the actively precautionary motive of holding international reserves under the consideration of opportunity cost in investing action. In addition, sensitivity analyses for the key variables of optimal solution are also provided. Accordingly, this paper represented a dynamic investment philosophy of managing international reserves fur a country’s monetary authority with great reference.
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