Reserve Adequacy in Emerging Market Economies

49 Pages Posted: 31 Jan 2006  

J. Onno de Beaufort Wijnholds

International Monetary Fund (IMF)

Arend Kapteyn

International Monetary Fund (IMF)

Date Written: September 2001

Abstract

This paper analyzes reserve adequacy in emerging market countries. It argues that the old rule of thumb of maintaining reserves equivalent to three months of imports has become obsolete and that, instead, a new benchmark is needed which takes into account the increased importance of capital flows. The paper suggests such a benchmark, consisting of the sum of short-term debt on a residual maturity basis (the external drain) and an allowance for possible capital flight (the internal drain), taking into account differences in country risk and exchange rate regime.

Keywords: Reserves, vulnerability, capital flight

JEL Classification: F31, F41

Suggested Citation

Wijnholds, J. Onno de Beaufort and Kapteyn, Arend, Reserve Adequacy in Emerging Market Economies (September 2001). IMF Working Paper, Vol. , pp. 1-49, 2001. Available at SSRN: https://ssrn.com/abstract=879941

J. Onno de Beaufort Wijnholds (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Arend Kapteyn

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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