The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications - Archive ouverte HAL Access content directly
Journal Articles The Economic Journal Year : 2011

The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications

(1, 2, 3, 4) , (3, 5, 6)
1
2
3
4
5
6

Abstract

We present a model of the optimal level of international reserves for a small open economy seeking insurance against sudden stops in capital flows. We derive a formula for the optimal level of reserves and show that plausible calibrations can explain reserves of the order of magnitude observed in many emerging market countries. The buildup of reserves in emerging market Asia can be explained only if one assumes a large anticipated output cost of sudden stops and a high level of risk aversion.

Dates and versions

halshs-00754518 , version 1 (20-11-2012)

Identifiers

Cite

Olivier Jeanne, Romain Rancière. The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications. The Economic Journal, 2011, 121 (555), pp.905-930. ⟨10.1111/j.1468-0297.2011.02435.x⟩. ⟨halshs-00754518⟩
695 View
0 Download

Altmetric

Share

Gmail Facebook Twitter LinkedIn More