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International Reserves, External Debt Maturity, and the Reinforcement Effect for Financial Stability

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  • Xingwang Qian
  • Andreas Steiner

Abstract

This paper studies how the maturity structure of external debt is affected by international reserves and how they reinforce financial stability through a more crisis-resilient maturity structure. We show in an illustrative theoretical model that reserves lengthen the maturity of external debt via a flattening of the yield curve. Using data of 66 emerging and developing countries and applying different econometric approaches, we find robust evidence that reserves increase the share of long-term (LT) relative to short-term (ST) external debt. Results hold for private and public external debt individually. Taking reserves and their effect on the debt maturity structure together, they reinforce financial stability.

Suggested Citation

  • Xingwang Qian & Andreas Steiner, 2016. "International Reserves, External Debt Maturity, and the Reinforcement Effect for Financial Stability," ifo Working Paper Series 211, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_211
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    Cited by:

    1. William Gabriel Brafu-Insaidoo, 2019. "International reserves, external debt maturity and exchange rate volatility in Ghana," Economic Change and Restructuring, Springer, vol. 52(3), pages 181-202, August.

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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