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

Xingwang Qian and Andreas Steiner

No GRU_2016_012, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

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.

Keywords: International Reserves; Capital Inflows; Debt Maturity (search for similar items in EconPapers)
JEL-codes: F3 F4 (search for similar items in EconPapers)
Pages: 42 pages
New Economics Papers: this item is included in nep-cba
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Published in Journal of International Money and Finance, available on February 20, 2017.

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https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232016-012%20Qian.pdf (application/pdf)

Related works:
Journal Article: International reserves and the maturity of external debt (2017)
Working Paper: International Reserves, External Debt Maturity, and the Reinforcement Effect for Financial Stability (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cth:wpaper:gru_2016_012

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