Optimal Foreign Reserves and Central Bank Policy under Financial Stress

• 成果类型: Article
• 署名作者: Cespede, Luis Felipe; Chang, Roberto
• 署名单位: Universidad de Chile; Central Bank of Chile; Rutgers University System; Rutgers University New Brunswick; National Bureau of Economic Research
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20210117
• 发表日期: 2024
• 页码: 230-267
• 关键词: crises

摘要

We study foreign reserves accumulation and liquidity policy in an open economy under financial stress. Firms and households finance investment and consumption by borrowing from banks, which bor-row from abroad. Binding financial constraints cause the domestic interest rate to rise over the world rate and the exchange rate to depreciate, implying inefficiently low investment and consumption. A role emerges for a central bank that accumulates reserves to provide international liquidity when financial frictions bind. Our analysis yields novel insights on the determinants of optimal reserves accu-mulation cum liquidity provision and their role vis-& agrave;-vis capital flow management policies.