Currency crises and foreign reserves : a simple model /

Currency crises and foreign reserves : a simple model /

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Bibliographic Details
Author / Creator:	Disyatat, Piti, 1973-
Imprint:	[Washington, D.C.] : International Monetary Fund, Research Dept., ©2001.
Description:	1 online resource (23 pages) : illustrations
Language:	English
Series:	IMF working paper, 2227-8885 ; WP/01/18 IMF working paper ; WP/01/18.
Subject:	Financial crises -- Econometric models. Foreign exchange -- Econometric models. Balance of payments -- Econometric models. Balance of payments -- Econometric models. Financial crises -- Econometric models. Foreign exchange -- Econometric models.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12496822

Hidden Bibliographic Details
ISBN:	1451891490 9781451891492 128160447X 9781281604477 9781451843644 145184364X 1462323855 9781462323852 1452768463 9781452768465 9786613785169 6613785164
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.
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.
Other form:	Print version: Disyatat, Piti, 1973- Currency crises and foreign reserves. [Washington, D.C.] : International Monetary Fund, Research Dept., ©2001
Standard no.:	10.5089/9781451891492.001

Description
Summary:	This paper addresses the important question of how far a government will run down its stock of foreign reserves in a defense of a fixed exchange rate. An optimizing model of currency crisis is presented in which the decision of whether or not to borrow in a defense of a peg is explicitly analyzed. The threshold level of reserves is then determined endogenously and shown to be a function of fundamental economic variables. The analysis also demonstrates how an increase in the level of reserves, a credit-rating upgrade, or the imposition of capital controls can remove the multiplicity of equilibria.
Physical Description:	1 online resource (23 pages) : illustrations
Format:	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.
Bibliography:	Includes bibliographical references (pages 22-23).
ISBN:	1451891490 9781451891492 128160447X 9781281604477 9781451843644 145184364X 1462323855 9781462323852 1452768463 9781452768465 9786613785169 6613785164
ISSN:	2227-8885 ;