Reserve Adequacy in Emerging Market Economics

International Monetary Fund

No 2001/143, IMF Working Papers from International Monetary Fund

Abstract: This paper analyzes reserve adequacy in emerging market countries. It argues that the old rule of thumb of maintaining reserves equivalent to three months of imports has become obsolete and that, instead, a new benchmark is needed which takes into account the increased importance of capital flows. The paper suggests such a benchmark, consisting of the sum of short-term debt on a residual maturity basis (the external drain) and an allowance for possible capital flight (the internal drain), taking into account differences in country risk and exchange rate regime.

Keywords: WP; emerging market country; reserve adequacy; import ratio; adequacy benchmark; oil exporter; Reserves; vulnerability; capital flight; opportunity cost; Emerging and frontier financial markets; Capital outflows; Reserve positions; Africa (search for similar items in EconPapers)
Pages: 49
Date: 2001-09-01
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Citations: View citations in EconPapers (10)

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