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dc.titleA Macroprudential Theory of Foreign Reserve Accumulation
dc.contributor.authorArce, Fernando
dc.contributor.authorBengui, Julien
dc.contributor.authorBianchi, Javier
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.date.available2025-10-29T00:10:00
dc.date.issue2025-10-29T00:10:00
dc.description.abstractWe propose a macroprudential theory of foreign reserve accumulation that can rationalize the secular trends in public and private international capital flows. In middle-income countries, the increase in international reserves has been associated with elevated private capital inflows, both in the aggregate and in the cross-section, and economies with a more open capital account have accumulated more reserves. We present an open economy model of financial crises that is consistent with these features. We show that optimal reserve management policy leans against the wind, raising gross private borrowing while improving the net foreign asset position and reducing exposure to crises.
dc.format.extent64
dc.identifier.doihttp://dx.doi.org/10.18235/0013770
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/A-Macroprudential-Theory-of-Foreign-Reserve-Accumulation.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectCredit Constraint
dc.subjectExternal Debt
dc.subjectTaxation
dc.subjectCapital Flow
dc.subjectExchange Rate
dc.subjectGross Domestic Product
dc.subjectFinancial Crisis
dc.subjectCompetitiveness
dc.subject.jelcodeE58 - Central Banks and Their Policies
dc.subject.jelcodeF31 - Foreign Exchange
dc.subject.jelcodeF32 - Current Account Adjustment • Short-Term Capital Movements
dc.subject.jelcodeF34 - International Lending and Debt Problems
dc.subject.jelcodeF51 - International Conflicts • Negotiations • Sanctions
dc.subject.keywordsMacroprudential policy;International reserves;Financial Crises;Gross capital flows
dc.typeWorking Papers
idb.identifier.pubnumberIDB-WP-01718
idb.operationRG-K1098
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