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A puzzle in international economics is the high level of foreign exchange reserves accumulated by countries around the world. Such high levels of reserves represent a conundrum since they exceed all standard benchmarks of reserve adequacy, most notably in the case of leading emerging market economies (EMEs), such as Brazil, China, India, Russia, and South Korea. Unlike past studies that examined this phenomenon from a largely economic perspective, this study adopts a comprehensive political economy approach by focusing on both economic and political factors. The paper draws on an 'audience cost' argument to identify and examine various political economy factors in explaining why EMEs accumulate currency reserves, often beyond pure economic needs. The research focuses on a large-sample of over 100 developing and transition countries for the period 1980-2015. Fixed effects model estimates demonstrate support for the political economy thesis, particularly for strategic factors such as domestic political competition, mercantilism, and global political ambitions. Support is also found for institutional characteristics, namely, political system, central bank independence, and exchange rate system. The findings of the study advance our understanding of the motivations associated with international currency reserves and the drivers of policy choices in this domain.

Existing empirical research on the factors that motivate the enactment of competition laws has largely focused on economic determinants rather than political ones. This article fills that gap by incorporating a few key political variables into the analysis of the enactment of competition laws across the world. Specifically, the article focuses on three political variables that, for the most part, capture the political characteristics relevant to the enactment of competition laws: the nature of the political system, the rule of law, and the political ideology of the ruling government. The empirical analysis focuses on 183 countries during the period 1990–2008. The results from panel data regressions indicate that the enactment of competition laws is more likely if the political system is more democratic and left-leaning. Surprisingly, countries with weak systems of rule of law are more likely to enact competition laws, leading to questions of application and enforcement.