International Reserves, External Debt Maturity, and the Reinforcement Effect for Financial Stability

Xingwang Qian and Andreas Steiner

No 211, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: This paper studies how the maturity structure of external debt is affected by international reserves and how they reinforce financial stability through a more crisis-resilient maturity structure. We show in an illustrative theoretical model that reserves lengthen the maturity of external debt via a flattening of the yield curve. Using data of 66 emerging and developing countries and applying different econometric approaches, we find robust evidence that reserves increase the share of long-term (LT) relative to short-term (ST) external debt. Results hold for private and public external debt individually. Taking reserves and their effect on the debt maturity structure together, they reinforce financial stability.

JEL-codes: F30 F40 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Working Paper: International Reserves, External Debt Maturity, and the Reinforcement Effect for Financial Stability
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ifowps:_211

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