International Reserve Management under Rollover Crises

Mauricio Barbosa-Alves (), Javier Bianchi and Cesar Sosa-Padilla

No 805, Working Papers from Federal Reserve Bank of Minneapolis

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

Keywords: International reserves; rollover crises; Sovereign debt (search for similar items in EconPapers)
JEL-codes: E40 E50 F32 F34 F41 (search for similar items in EconPapers)
Date: 2024-04-17
New Economics Papers: this item is included in nep-dge, nep-ifn, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: International Reserve Management under Rollover Crises (2024)
Working Paper: International Reserve Management under Rollover Crises (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:98384

DOI: 10.21034/wp.805

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