Reserve Adequacy in Emerging Market Economies

By J. O. D. B. Wijnholds, A. Kapteyn. Social Science Research Network, 2001

160 citations recorded by the source corpus.

This paper analyzes reserve adequacy in emerging market countries. It argues that the old rule of thumb of maintaining reserves equivalent to three months of imports has become obsolete and that, instead, a new benchmark is needed which takes into account the increased importance of capital flows. The paper suggests such a benchmark, consisting of the sum of short-term debt on a residual maturity basis (the external drain) and an allowance for possible capital flight (the internal drain), taking into account differences in country risk and exchange rate regime.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/9264db8ac9f5157df7b6d407c67c0abf08bf4e2e

Citations in the corpus

• International Reserves in Emerging Market Countries: Too Much of a Good Thing? (2007, unknown): “The rationale for this ratio is that broad money reflects a country’s exposure to the withdrawal of assets (Calvo, 1996; De Beaufort-Wijnholds, Onno, and Kapteyn, 2001).”
• A Cross-Country Empirical Analysis of International Reserves (2009, unknown): “Courchene and Youssef (1967), for example, appeal to the monetarist model of balance of payments to justify the use of money in their international reserve regression.5 More recently, de Beaufort Wijnholds and Kapteyn (2001) argue that money stock in an economy is a proxy for potential capital fligh”