International Reserve Adequacy in Central America

ByKristin Magnusson Bernard

June 1, 2011

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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

Countries’ absolute and relative international reserves adequacy has recently attracted considerable attention. The analysis has however concentrated on the largest and most advanced economies. We apply various methodologies for assessing reserve adequacy in Central America, taking into account the region’s high degree of deposit dollarization. We find that reserve cover is low both in an absolute and relative sense, suggesting further reserve accumulation is an important policy option for reducing vulnerabilities.

Subject: Central banks, Emerging and frontier financial markets, Exchange rate flexibility, External debt, Financial markets, International reserves, Reserve positions, Reserves accumulation

Keywords: balance of payments crises, Central America, Central America's reserve cover, Central American economy, debt, demand regression, Emerging and frontier financial markets, financial dollarization, Foreign reserves, GDP ratio, GDP volatility, International reserves, precautionary reserve, reserve, reserve demand, Reserve positions, Reserves accumulation, WP

Pages:
27
Volume:
2011
DOI:
https://doi.org/10.5089/9781455268443.001
Issue:
144
Series:
Working Paper No. 2011/144
Stock No:
WPIEA2011144
ISBN:
9781455268443
ISSN:
1018-5941

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