Hidden Bibliographic Details
| ISBN: | 1451891490
9781451891492
128160447X
9781281604477
9781451843644
145184364X
1462323855
9781462323852
1452768463
9781452768465
9786613785169
6613785164
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| Notes: | Includes bibliographical references (pages 22-23).
Restrictions unspecified
Electronic reproduction. [Place of publication not identified] : HathiTrust Digital Library, 2010.
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212
English.
digitized 2010 HathiTrust Digital Library committed to preserve
Print version record.
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| Summary: | How far will a government run down its stock of foreign reserves in a defense of a fixed exchange rate? Existing literature on currency crises has paid very little attention to this important question of how the threshold level of reserves is determined. The traditional literature, as expounded by Krugman (1979), arbitrarily assumes the threshold to be zero without offering any justification of why this should be so. 2 More recent 'second generation' models rightly purport the view that in these modern times, countries have access to world capital markets so that reserve adequacy per se is far less of a concern than in the 1970's when Krugman's model was constructed. 3 These models however, go to the extreme by avoiding altogether an explicit consideration of reserves so that a threshold simply does not exist. The implicit assumption of course, is that foreign reserves can be borrowed freely and without limit from the world capital market. There has also been no analysis of how a government's decision to borrow reserves may affect the equilibrium determination and thus sustainability of a peg. As things stand, the meaning and relevance of a reserve threshold in a world where solvent governments can borrow from international capital markets, other central banks, or multilateral institutions is unclear.
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| Other form: | Print version: Disyatat, Piti, 1973- Currency crises and foreign reserves. [Washington, D.C.] : International Monetary Fund, Research Dept., ©2001
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| Standard no.: | 10.5089/9781451891492.001
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