TY  - JOUR
AU  - Aizenman,Joshua
AU  - Jinjarak,Yothin
AU  - Park,Donghyun
TI  - International reserves and swap lines: substitutes or complements?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15804
PY  - 2010
Y2  - March 2010
UR  - http://www.nber.org/papers/w15804
L1  - http://www.nber.org/papers/w15804.pdf
N1  - Author contact info:
Joshua Aizenman
Economics and SIR
USC
University Park
Los Angeles, CA 90089-0043
Tel: 213-740-4066
E-Mail: aizenman@usc.edu

Yothin Jinjarak
University of London
DeFiMS SOAS
534 College Buildings
London, UK WC1H 0XG
E-Mail: yj5@soas.ac.uk

Donghyun Park
Economics and Research Department
Asian Development Bank
Manila, Philippines
Tel: (632) 632-5825/6385
Fax: (632) 636-2342
E-Mail: dpark@adb.org
AB  - Developing Asia experienced a sharp surge in foreign currency reserves prior to the 2008-9 crisis. The global crisis has been associated with an unprecedented rise of swap agreements between central banks of larger economies and their counterparts in smaller economies. We explore whether such swap lines can reduce the need for reserve accumulation. The evidence suggests that there is only a limited scope for swaps to substitute for reserves. The selectivity of the swap lines indicates that only countries with significant trade and financial linkages can expect access to such ad hoc arrangements, on a case by case basis. Moral hazard concerns suggest that the applicability of these arrangements will remain limited. However, deepening swap agreements and regional reserve pooling arrangements may weaken the precautionary motive for reserve accumulation.
ER  -