Hoarding for Stormy Days - Test of International Reserves Providing Financial Buffer Services

Joshua Aizenman and Yothin Jinjarak

No 25909, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper outlines a tractable cost-benefit analysis of the buffer stock financial services provided by international reserves and applies it to 8 of the largest Emerging Markets (BRICS, Indonesia, Mexico, Turkey) during 2000-2019. The efficient management of international reserves generates sizable benefits for countries characterized by hard-currency external debt. These benefits increase with the volatility of the real exchange rates and sovereign spreads. While the first-best policy calls for prudential regulations, counter-cyclical management of hoarding reserves in good times and selling them in bad times provides buffers stock financial services adding up to about 3% of GDP during our sample period.

JEL-codes: F31 F34 F41 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-opm and nep-sea
Note: IFM
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Citations: View citations in EconPapers (4)

Published as Joshua Aizenman & Yothin Jinjarak, 2020. "Hoarding for stormy days—Test of international reserves adjustment providing financial buffer stock services," Review of International Economics, vol 28(3), pages 656-675.

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