what is the purpose of looseconfig.xmi file?

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I've seen this file created under Websphere Application Server configurations, also; I've noticed this file declares "binariesPath" that actually is a workspace.

what is the purpose of this file? who created it?

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Normally, an application is installed in WebSphere Application Server as a zipped .ear. If your application is large or frequently changing there is significant overhead to packaging all classes/resources in all modules, packaging all modules int an .ear, deploying the packaged .ear to the server, and having the server unpackage it all.

The looseconfig.xmi file is created by RAD and passed to the server via a deployment property. The file describes the logical structure of an application and indicates that the actual classes/resources are physically located in the RAD workspace. This avoids the packaging/unpackaging overhead during deployment.