For a Few Dollars More: Reserves and Growth in Times of Crises

Matthieu Bussiere, Gong Cheng, Menzie Chinn and Noëmie Lisack

No 19791, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Based on a dataset of 112 emerging economies and developing countries, this paper addresses two key questions regarding the accumulation of international reserves: first, has the accumulation of reserves effectively protected countries during the 2008-09 financial crisis? And second, what explains the pattern of reserve accumulation observed during and after the crisis? More specifically, the paper investigates the relation between international reserves and the existence of capital controls. We find that the level of reserves matters: countries with high reserves relative to short-term debt suffered less from the crisis, particularly if associated with a less open capital account. In the immediate aftermath of the crisis, countries that depleted foreign reserves during the crisis quickly rebuilt their stocks. This rapid rebuilding has, however, been followed by a deceleration in the pace of accumulation. The timing of this deceleration roughly coincides with the point when reserves reached their pre-crisis level and may be related to the fact that short-term debt accumulation has also decelerated in most countries over this period.

JEL-codes: F31 G01 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-mon and nep-opm
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Citations: View citations in EconPapers (12)

Published as Bussière, Matthieu & Cheng, Gong & Chinn, Menzie D. & Lisack, Noëmie, 2015. "For a few dollars more: Reserves and growth in times of crises," Journal of International Money and Finance, Elsevier, vol. 52(C), pages 127-145.

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Journal Article: For a few dollars more: Reserves and growth in times of crises (2015)
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