49 Pages Posted: 31 Jan 2006
Date Written: September 2001
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: 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