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Holding International Reserves in an Era of High Capital Mobility
Author:
Mr. Robert P Flood
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and
Ms. Nancy P. Marion null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 062
Language:
English
Publication Date:
01 Apr 2002
DOI:
https://doi.org/10.5089/9781451848298.001
ISBN:
9781451848298
ISSN:
1018-5941
Pages:
53
Keywords:
WP; reserve holding; holding; volatility measure; International reserves; capital mobility; adjustment cost; reserve authority; lower bound; Imports; Stocks; Gold reserves; Exchange rates; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Why do countries hold so much international reserves? Global reserve holdings (excluding gold) were equivalent to 17 weeks of imports at the end of 1999. That is almost double what they were at the end of 1960 and about 20 percent higher than they were at the start of the 1990s. In this paper we study countries’ reserve holdings in light of both the increased financial volatility experienced in the last decade and diminished adherence to fixed exchange rates. We find that buffer-stock reserve models work about as well in the modern floating-rate period as they did during the Bretton Woods regime. During both periods, however, the models’ fundamentals explain only a small portion (10-15 percent) of reserves volatility.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund