Sudden stops and reserve accumulation in the presence of international liquidity risk

• 成果类型: Article
• 署名作者: Lutz, Flora; Zessner-Spitzenberg, Leopold
• 署名单位: University of Vienna; Humboldt University of Berlin
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2023.103729
• 发表日期: 2023
• 关键词: International reserves; sudden stops; liquidity; Macroprudential policy; Pecuniary externalities

摘要

We propose a small open economy model where agents borrow internationally and invest in liquid foreign assets to insure against liquidity shocks, which temporarily shut out the economy of short-term credit markets. Due to a pecuniary externality, individual agents overborrow and hold too little liquid assets relative to a social planner. This inefficiency rationalizes macroprudential policy intervention in the form of reserve accumulation at the central bank to stabilize trade and the real exchange rate. Our model quantitatively matches the deprecia-tion of the real exchange rate and contractions in output, gross trade flows, and foreign reserve holdings during Sudden Stops.(c) 2023 Elsevier B.V. All rights reserved.