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Necessary Levels, Costs and Policies for International Reserves in Latin America

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  • Germán Alarco Tosoni

    ()
    (Investigador principal y profesor, Centro de Negocios (CENTRUM), Pontificia Universidad Católica del Perú. Lima, Perú.)

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    Abstract

    This article examines the dynamic growth of international reserves for the entire group of Latin American countries in an international comparative perspective and with respect to variables such as imports, current account balances, capital flows and GDP. We also present a review of the theories to analyze the causes, and a balance of benefits and maintenance costs. We have used the Wijnholds methodology to determine the necessary levels of international reserves for the period 2005-2008, considering the commitments of public and private external debt in the short term, and potential leakage of deposits from the local financial system. It is estimated that, for the last year, levels of excess reserves are equivalent to between US$ 170-200 billions. Also, the annual maintenance cost is equivalent to 0.8 per cent of GDP for all the countries surveyed. Finally, it outlines a set of proposals to take advantage of these circumstances.

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    File URL: http://www.economiamexicana.cide.edu/num_anteriores/XX-1/05.EM.Reservasinternacionales(145-180).pdf
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    Bibliographic Info

    Article provided by in its journal Economia Mexicana NUEVA EPOCA.

    Volume (Year): XX (2011)
    Issue (Month): 1 (January-June)
    Pages: 145-180

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    Handle: RePEc:emc:ecomex:v:20:y:2011:i:1:p:145-180

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    Related research

    Keywords: international reserves; Latin America; reserve costs; international policies.;

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    Cited by:
    1. Javier Gómez Restrepo & Juan Sebastián Rojas Bohórquez, 2013. "Assessing Reserve Adequacy: The Colombian Case," Borradores de Economia, Banco de la Republica de Colombia 781, Banco de la Republica de Colombia.

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