The article explores why some countries in the Far East hold more international reserves than others. By analyzing data from 125 developing countries, the researchers found that factors like the size and volatility of international transactions, exchange-rate arrangements, and political considerations influence reserve holdings. Before the 1997 financial crisis, the predicting equation worked well, but after the crisis, it underestimated reserve holdings in Far East countries due to factors like sovereign risk and fiscal liabilities. Countries with higher perceived risk and fiscal obligations tend to hold more reserves, while those with political instability or corruption hold less. Models incorporating loss aversion also predict a higher demand for reserves during crises.