Economics at your fingertips  

Debt Redemption and Reserve Accumulation

Laura Alfaro and Fabio Kanczuk

IMF Economic Review, 2019, vol. 67, issue 2, No 1, 287 pages

Abstract: Abstract In the past decade, foreign participation in local-currency bond markets in emerging countries has increased dramatically. We revisit sovereign debt sustainability under the assumptions that countries can borrow internationally using their own currencies and accumulate reserves. As opposed to traditional sovereign debt models, asset-valuation effects occasioned by currency fluctuations act to absorb global shocks and smooth consumption. Countries do not accumulate reserves to be depleted in “bad” times. Instead, issuing domestic debt while accumulating reserves acts as a hedge against external shocks. A quantitative exercise of the Brazilian economy suggests this strategy to be effective for smoothing consumption and reducing the occurrence of default.

JEL-codes: F34 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Debt Redemption and Reserve Accumulation (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2

DOI: 10.1057/s41308-018-0058-4

Access Statistics for this article

More articles in IMF Economic Review from Palgrave Macmillan, International Monetary Fund
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2023-12-11
Handle: RePEc:pal:imfecr:v:67:y:2019:i:2:d:10.1057_s41308-018-0058-4