After the 1997-98 Asian currency crises, substantial foreign reserve accumulations in developing countries, particularly Asian emerging market countries, have caused many debates. Basically, there are two explanations. The rst is for the purpose of self-insurance. Holding enough foreign reserves could prevent a speculative currency attack or a shock from a sudden stop. Second, the accumulation of substantial reserves is a by-product of an export-led growth strategy. The accumulation of foreign reserves stems from central bank intervention to maintain an undervalued currency so as to stimulate exports and to promote economic growth. In view of existent literatures have not yet proved that the holding excessive foreign reserves is the by-products of undervalued currency, this research try to use two types variables about precautionary motive and export-led growth strategy to support the hoarding foreign reserves is related to maintain the competitiveness of export.
