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International Reserve Adequacy in the Gambia
Author:
Eugen Tereanunull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 215
Language:
English
Publication Date:
01 Sep 2010
DOI:
https://doi.org/10.5089/9781455208807.001
ISBN:
9781455208807
ISSN:
1018-5941
Pages:
16
Keywords:
WP; opportunity cost; reserve; yield; asset; coverage ratio; Gambia; Precautionary savings; Reserve adequacy; Optimal reserves; Balance of payments; adequacy indicator; reserve coverage; adequacy assessment; open economy; precautionary motive; import coverage indicator; reserve adequacy indicator; holdings in The Gambia; lower bound; coverage indicator; lower bound for the opportunity cost; International reserves; Imports; Consumption; Terms of trade; Reserve positions; West Africa; Sub-Saharan Africa; Global
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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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This paper applies intertemporal models of precautionary saving to compute an optimal level of international reserves for The Gambia. The analysis focuses on current account shocks specific to a low-income economy with a significant import component and complements a more standard, rule-of-thumb reserve adequacy assessment. The results suggest a central range from 4.5 months to 7 months of imports, which is broadly aligned with the recent actual coverage. Notwithstanding parameter sensitivity, the simulations allow for more informed policy decisions that balance flexibility with a prudent approach to reserve use.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2010: Issue 215