Reserve accumulation and financial crises: From individual protection to systemic risk

Andreas Steiner

European Economic Review, 2014, vol. 70, issue C, 126-144

Abstract: This paper provides a new perspective on the relationship between countries׳ international reserve holdings and financial crises: while the “local” view holds that reserves may prevent domestic crises, it overlooks that the accumulation of reserves relaxes the financing constraint of the reserve currency country and may cause a financial crisis in the centre, which is transmitted globally. According to this “global” view reserve accumulation might destabilize the international financial system. Since the crisis affects all countries alike, the accumulation of reserves imposes a negative externality on non-accumulating countries.

Keywords: Financial crises; Global imbalances; International reserves; Macro-prudential policies; Systemic risk (search for similar items in EconPapers)
JEL-codes: D62 E58 F31 F41 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:70:y:2014:i:c:p:126-144

DOI: 10.1016/j.euroecorev.2014.04.005

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