Reserve uncertainty and the supply of international credit

Joshua Aizenman, Nancy Marion

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


This paper shows that uncertainty about an emerging market's international reserves can affect the willingness of foreign investors to supply international credits. We illustrate the relevance of this concern for South Korea. Uncertainty has asymmetric effects. When the expected reserve position of an emerging market is large relative to the potential bailout in bad states of nature, reserve volatility does not matter. However, the same amount of reserve volatility can cause a large reduction in the supply of international credit if the private sector seriously downgrades its priors about repayment possibilities or becomes more pessimistic about the emerging market's reserve position.

Original languageEnglish
Pages (from-to)631-649
Number of pages19
JournalJournal of Money, Credit and Banking
Issue number3 I
StatePublished - 1 Jan 2002
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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