International reserves management and the current account

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: The paper assesses the costs and benefits of active international reserve management (IRM), shedding light on the question of how intense should IRM be for an emerging market. In principle, an active IRM strategy could lower real exchange rate volatility induced by terms of trade shocks; provide self insurance against sudden stops; reduce the speed of adjustment of the current account; and even allow for higher growth if it fosters exports (“mercantilist” motive). The message of the report is mixed – management of reserves is not a panacea. The mercantilist case for hoarding international reserves, as an ingredient of an export led growth strategy, is dubious. Done properly, IRM augments macro economic management in turbulent times, mitigating the impact of external adverse shocks and allowing for a smoother current account adjustment. These benefits are especially important for commodity exporting countries, and countries with limited financial development.

Keywords: International; reserve; management (search for similar items in EconPapers)
Date: 2007-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.escholarship.org/uc/item/22q271t2.pdf;origin=repeccitec (application/pdf)

Related works:
Chapter: International Reserve Management and the Current Account (2008)
Working Paper: International Reserves Management and the Current Account (2007)
Working Paper: International Reserves Management and the Current Account (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cdl:ucscec:qt22q271t2

Access Statistics for this paper

More papers in Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff ().