1. International Reserve Management under Rollover Crises.
- Author
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Barbosa-Alves, Mauricio, Bianchi, Javier, and Sosa-Padilla, César
- Subjects
FOREIGN exchange reserves ,ROLLOVERS (Finance) ,DEBT ,SPREAD (Finance) ,RESERVES (Accounting) - Abstract
This paper investigates how a government should manage international reserves when it faces the risk of a rollover crisis. We ask, should the government accumulate reserves or reduce debt to make itself less vulnerable? We show that the optimal policy entails initially reducing debt, followed by a subsequent increase in both debt and reserves as the government approaches a safe zone. Furthermore, we uncover that issuing additional debt to accumulate reserves can lead to a reduction in sovereign spreads. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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