The Optimal Level of International Reserves for Emerging Market Countries : Formulas and Applications »
Series: IMF Working Papers
Author(s): Romain Ranciere , and Olivier Jeanne
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 October 2006
Keywords: Balance of Payments Crises, probability, domestic absorption, calibration, short-term debt, external debt,
We present a model of the optimal level of international reserves for a small open economy that is vulnerable to sudden stops in capital flows. Reserves allow the country to smooth domestic absorption in response t...