Optimal reserve management and sovereign debt

• 成果类型: Article
• 署名作者: Alfaro, Laura; Kanczuk, Fabio
• 署名单位: Harvard University; National Bureau of Economic Research; Universidade de Sao Paulo
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2008.09.005
• 发表日期: 2009
• 页码: 23-36
• 关键词: Foreign reserves; Sovereign debt; default; sudden stops; sustainability

摘要

Most models currently used to determine optimal foreign reserve holdings take the level of international debt as given. However, given the sovereign's willingness-to-pay incentive problems, reserve accumulation may reduce sustainable debt levels. In addition, assuming constant debt levels does not allow addressing one of the puzzles behind using reserves as a means to avoid the negative effects of crisis: why do not sovereign countries reduce their sovereign debt instead? To study the joint decision of holding sovereign debt and reserves, we construct a stochastic dynamic equilibrium model calibrated to a sample of emerging markets. We obtain that the reserve accumulation does not play a quantitatively important role in this model. In fact, we find the optimal policy is not to hold reserves at all. This finding is robust to considering interest rate shocks, sudden stops, contingent reserves and reserve dependent output costs. (c) 2008 Elsevier B.V. All rights reserved.