The accumulation of foreign exchange reserves destroys growth by sterilising the country’s savings

When emerging or oil-exporting countries have external surpluses, they quite often accumulate foreign exchange reserves to prevent their exchange rates from appreciating. But this accumulation of foreign exchange reserves destroys growth since it sterilises savings which, instead of being invested in the country, is lent to other countries (mainly to treasury departments in reserve currency countries). Emerging and oil-exporting countries could choose to not accumulate foreign exchange reserves, let their currencies appreciate and invest all their savings in their own country. This choice would be negative, especially for the United States, which could no longer finance its external deficit.