Reserve accumulation, growth and financial crises
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- dc.contributor.author Benigno, Gianluca
- dc.contributor.author Fornaro, Luca
- dc.contributor.author Wolf, Martin
- dc.date.accessioned 2021-09-23T11:11:56Z
- dc.date.available 2021-09-23T11:11:56Z
- dc.date.issued 2022-03
- dc.description.abstract We present a model that reproduces two salient facts characterizing the international monetary system: Fast growing emerging countries i) run current account surpluses, ii) accumulate international reserves and receive net private inflows. We study a two-sector, tradable and nontradable, small open economy. There is a growth externality in the tradable sector and agents have imperfect access to international financial markets. By accumulating foreign reserves, the government induces a real exchange rate depreciation and a reallocation of production towards the tradable sector that boosts growth. Financial frictions generate imperfect substitutability between private and public debt flows so that private agents do not perfectly offset the government policy. The possibility of using reserves to provide liquidity during crises amplifies the positive impact of reserve accumulation on growth. The optimal reserve management entails a fast rate of reserve accumulation, as well as higher growth and larger current account surpluses compared to the economy with no policy intervention.ca
- dc.format.mimetype application/pdf*
- dc.identifier.uri http://hdl.handle.net/10230/48497
- dc.language eng
- dc.language.iso engca
- dc.rights.accessRights info:eu-repo/semantics/openAccessca
- dc.subject.other Foreign reserve accumulationca
- dc.subject.other Gross capital flowsca
- dc.subject.other Growthca
- dc.subject.other Financial crisesca
- dc.subject.other Allocation puzzleca
- dc.subject.other Exchange rate undervaluationca
- dc.title Reserve accumulation, growth and financial crisesca
- dc.type info:eu-repo/semantics/workingPaperca