Foreign exchange reserves in a credit constrained economy

Kurma? Akdogan

International Economics, 2012, issue 130, 59-79

Abstract: We discuss the role of foreign exchange reserves as precautionary savings under an imperfect market framework due to the presence of endogenously determined borrowing constraints. We show that cost of holding reserves is higher in borrowin constrained economies than unconstrained ones as a result of the leverage effect of the debt.

Keywords: Foreign Exchange Reserves; Credit Constraints (search for similar items in EconPapers)
JEL-codes: F32 F34 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:cii:cepiie:2012-q2-130-3

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