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Financial Buffers in a Euroized Economy: Republic of Kosovo
Author:
Javier Kapsoli
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Ezgi O. Ozturk https://isni.org/isni/0000000404811396 International Monetary Fund

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Series:
Selected Issues Papers
Volume/Issue:
Volume 2025: Issue 003
Language:
English
Publication Date:
16 Jan 2025
DOI:
https://doi.org/10.5089/9798400298073.018
ISBN:
9798400298073
ISSN:
2958-7875
Pages:
10
Keywords:
Reserve adequacy; euroization; central bank reserves; liquidity buffers; foreign exchange reserves; bank deposits; monetary policy; Kosovo; Euroized economy; ECB repo line; lender of last resort model; government deposit; Currencies; Lender of last resort; International reserves; Global
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IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries. It is based on the information available at the time it was completed.
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This paper analyzes reserve adequacy measurement in Kosovo, where euro serves as the legal tender. The study adapts the IMF's Assessing Reserve Adequacy framework to Kosovo's unique monetary context, focusing on precautionary motives for holding reserves. The analysis reveals limited readily available reserves at the Central Bank of Kosovo and recommends additional government deposits of 1.75-5.75 percent of GDP. Given the significant opportunity costs of maintaining such deposits, the paper suggests alternative solutions, including exploring a private lender of last resort model and maintaining ECB repo lines.
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Cover Selected Issues Papers
Selected Issues Papers
Publisher:
International Monetary Fund