Foreign Currency Deposits and International Liquidity Shortages in Pakistan
AbstractThis paper studies the implications of foreign currency deposits (FCDs) for international liquidity shortages in Pakistan. The analysis focuses on how the large volume of FCDs and the specific institutional characteristics of those deposits have made the Pakistan economy highly vulnerable to exogenous shocks. The analysis shows that FCDs created another channel for government borrowing, and fiscal sustainability in a "closed" system may be very different from sustainability in a more "open" system. There is a need to think of these issues in terms of total balance sheet vulnerability, and we recommend measures that would make domestic-currency-denominated assets attractive to investors.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 04/167.
Date of creation: 01 Sep 2004
Date of revision:
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Other versions of this item:
- Abbas Mirakhor & Iqbal Zaidi, 2006. "Foreign Currency Deposits and International Liquidity Shortages in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(1), pages 49-85.
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-22 (All new papers)
- NEP-DEV-2005-10-22 (Development)
- NEP-FIN-2005-10-22 (Finance)
- NEP-FMK-2005-10-22 (Financial Markets)
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