Hoarding for stormy days—Test of international reserves adjustment providing financial buffer stock services

Joshua Aizenman, Yothin Jinjarak

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

This paper outlines a tractable cost-benefit analysis of the buffer stock financial services provided by international reserves (IR) and applies it to eight of the largest Emerging Markets (BRICS, Indonesia, Mexico, Turkey) during 2000–2019. The efficient management of IR 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 the gross domestic product during our sample period.

Original languageEnglish
Pages (from-to)656-675
Number of pages20
JournalReview of International Economics
Volume28
Issue number3
DOIs
StatePublished - 1 Aug 2020
Externally publishedYes

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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