Question

economists have demonstrated that herding - in which individuals converge on the same action by imitating the economic decisions of one or more peers - occurs among investors. investigating whether herding also occurs among nations in matters of economic policy, maru etta - nkwelle examined changes in the foreign currency reserves of emerging economies in various world regions in the years following the widespread financial crisis of 1997. etta - nkwelle posited that herding would manifest in regional peer countries converging on the same foreign currency accumulation rate regardless of each countrys observable circumstances. she found that asian countries showed evidence of herding but african countries did not. based on the text, which finding, if true, would best account for the discrepancy etta - nkwelle observed? a the majority of the currency held in reserves by the african countries was foreign currency, whereas the majority of the currency held in reserves by the asian countries was domestic currency. b the african countries tended to accumulate a variety of foreign currencies for their reserves, whereas the asian countries tended to favor a single foreign currency for their reserves. c most of the african countries belonged to international economic unions that set individual foreign - currency accumulation policies for each member, whereas the asian countries were largely free to set their own policies. d the 1997 financial crisis resulted in immediate declines in many of the african countries foreign currency reserves, whereas the crisis had few short - term effects on the foreign currency reserves of most of the asian countries.

Explanation:

The text discusses the differences in foreign - currency reserve accumulation and herding behavior between African and Asian countries. Option A directly addresses the difference in the variety of foreign currencies held in reserves by the two regions, which can account for the observed discrepancy in herding behavior. Option B focuses on the preference for a single currency rather than the variety. Option C is about currency - policy setting in international economic unions, not directly related to the reserve currency variety. Option D is about the impact of the 1997 financial crisis on reserves, not the variety of reserve currencies.

Answer:

A. The majority of the currency held in reserves by the African countries was foreign currency, whereas the majority of the currency held in reserves by the Asian countries was domestic currency.