International Reserves and Self-Insurance against External Shocks

June 1, 2008

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Format: Chicago

Régis Barnichon. International Reserves and Self-Insurance against External Shocks, (USA: International Monetary Fund, 2008) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper develops an analytical framework that helps to quantify the optimal level of international reserves for a small open economy with limited access to foreign capital and subject to natural disasters or terms of trade shocks. International reserves allow the country to relieve balance of payments pressures caused by external shocks and to avoid large fluctuations in imports. I calibrate the model to two regions, the Caribbean and the Sahel, and assess the sensitivity of the results.

Subject: Exports, Imports, International reserves, Natural disasters, Terms of trade

Keywords: Foreign exchange, Opportunity cost, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/149
Stock No:

WPIEA2008149
ISBN:

9781451870077
ISSN:

1018-5941

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