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International Reserve Management under Rollover Crises

Mauricio Barbosa-Alves, Javier Bianchi and Cesar Sosa-Padilla
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Mauricio Barbosa-Alves: University of Minnesota

No 321, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: This paper investigates how a government should manage international reserves whenit faces the risk of a rollover crisis. We ask, should the government accumulate reservesor reduce debt to make itself less vulnerable? We show that the optimal policy entailsinitially reducing debt, followed by a subsequent increase in both debt and reserves asthe government approaches a safe zone. Furthermore, we uncover that issuing additionaldebt to accumulate reserves can lead to a reduction in sovereign spreads.

Keywords: International reserves; sovereign debt; rollover crises. (search for similar items in EconPapers)
JEL-codes: E4 E5 F32 F34 F41 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2024-05
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mon and nep-opm
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Citations: View citations in EconPapers (1)

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https://rednie.eco.unc.edu.ar/files/DT/321.pdf (application/pdf)

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Working Paper: International Reserve Management under Rollover Crises (2024) Downloads
Working Paper: International Reserve Management under Rollover Crises (2024) Downloads
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