Benigno, GianlucaFornaro, LucaWolf, MartinUniversitat Pompeu Fabra. Departament d'Economia i Empresa2024-11-142024-11-142012-04-01Journal of International Economics, 139, article 103660, 2022http://hdl.handle.net/10230/68642We 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 non- tradable, 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.application/pdfengL'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative CommonsReserve accumulation, growth and financial crises<resourceType xmlns="http://datacite.org/schema/kernel-3" resourceTypeGeneral="Other">info:eu-repo/semantics/workingPaper</resourceType><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">foreign reserve accumulation</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">gross capital flows</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">growth</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">financial crises</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">allocation puzzle</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">exchange rate undervaluation</subject><subject xmlns="http://datacite.org/schema/kernel-3" subjectScheme="keyword">Macroeconomics and International Economics</subject><rights xmlns="http://datacite.org/schema/kernel-3">info:eu-repo/semantics/openAccess</rights>