THE DEMAND FOR INTERNATIONAL RESERVES.

The article presents information on international reserves. If economists could measure the need for reserves, they might be able to agree on the right way to reform the international monetary system. Most of the economists who propose drastic reform do so because they anticipate a shortage of reserves. Those who advocate more gradual change believe that reserves are adequate now and for the next several years some even believe that reserves are excessive. It is even difficult to measure the stock of reserves, as the several reserve assets and reserve credits now in use are not perfect substitutes for one another; equal amounts of gold, currency and credit may make unequal contributions to a nation's external liquidity. Governments have many reasons for holding reserve assets, including the requirements of domestic monetary legislation or long-standing custom. But the paramount reason for holding reserves is the commitment to maintain stable exchange rates in the lace of payments disturbances. Trade and private service flows, government transactions and capital movements are subject to several disturbances like secular, cyclical, seasonal and random.