International Reserve Management under Rollover Crises
This paper investigates how a government should manage international reserves when it faces the risk of a rollover crisis. We ask, should the government accumulate reserves or reduce debt to make itself less vulnerable? We show that the optimal policy entails initially reducing debt, followed by a subsequent increase in both debt and reserves as the government approaches a safe zone. Furthermore, we find that issuing additional debt to accumulate reserves can lead to a reduction in sovereign spreads. Evidence from a panel of emerging economies is consistent with these predictions: increases in reserves financed by public external borrowing are associated with lower spreads, and reserve holdings are not systematically drawn down during crisis episodes.
-
-
Copy CitationMauricio Barbosa-Alves, Javier Bianchi, and César Sosa-Padilla, "International Reserve Management under Rollover Crises," NBER Working Paper 32393 (2024), https://doi.org/10.3386/w32393.Download Citation
-
Published Versions
Mauricio Barbosa-Alves & Javier Bianchi & César Sosa-Padilla, 2026. "International Reserve Management Under Rollover Crises," The Quarterly Journal of Economics, vol 141(3), pages 2269-2311.
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals — the NBER Reporter, the NBER Digest, the Bulletin on Health, and the Bulletin on Entrepreneurship — as well as online conference reports, video lectures, and interviews.
