A Macroprudential Theory of Foreign Reserve Accumulation / Fernando Arce, Julien Bengui, Javier Bianchi.

By:

Arce, Fernando

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w26236.Publication details: Cambridge, Mass. National Bureau of Economic Research 2019.Description: 1 online resource: illustrations (black and white)Subject(s):

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: This paper proposes a theory of foreign reserves as macroprudential policy. We study an open economy model of financial crises, in which pecuniary externalities lead to overborrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation. The optimal reserve accumulation policy leans against the wind and significantly reduces the exposure to financial crises. The theory is consistent with the joint dynamics of private and official capital flows, both over time and in the cross section, and can quantitatively account for the recent upward trend in international reserves.

Tags from this library: No tags from this library for this title. Log in to add tags.

Average rating: 0.0 (0 votes)

Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w26236 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

Collection: Colección NBER Close shelf browser (Hides shelf browser)

Previous	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	Next
Previous	nber w26233 Oakland’s Sugar-Sweetened Beverage Tax: Impacts on Prices, Purchases and Consumption by Adults and Children /	nber w26234 Impact of Defaults in Retirement Saving Plans: Public Employee Plans /	nber w26235 Local Effects of Land Grant Colleges on Agricultural Innovation and Output /	nber w26236 A Macroprudential Theory of Foreign Reserve Accumulation /	nber w26237 Exposure to Daily Price Changes and Inflation Expectations /	nber w26238 Changes in Family Structure and Welfare Participation Since the 1960s: The Role of Legal Services /	nber w26239 Granular Search, Market Structure, and Wages /	Next

September 2019.

This paper proposes a theory of foreign reserves as macroprudential policy. We study an open economy model of financial crises, in which pecuniary externalities lead to overborrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation. The optimal reserve accumulation policy leans against the wind and significantly reduces the exposure to financial crises. The theory is consistent with the joint dynamics of private and official capital flows, both over time and in the cross section, and can quantitatively account for the recent upward trend in international reserves.