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Una Nota sobre Reserva Óptima y Riesgo Soberano: el caso Argentino 1997-2007
[A note on optimal reserves and sovereign risk: Argentina's case 1997-2007]

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  • Zarate, Cristina A.

Abstract

It has been observed in the last years a systematic process of reserve accumulation from emerging countries, even though is a clear consequence of international liquidity it is worth asking ourselves the purpose and the limits of applying this policies by Monetary Officials. The purpose herein is to resume the debate on Optimum Reserves in Argentina, from the analysis of our recent past and on the basis of three stylized facts that have hindered our growth on a long term stable path: Debt crisis, Bank or financial crisis and currency exchange crisis. Taking into account the Default declaration in 2001 and the enormous adjustment that our economy had to face, reflecting on the “Productive model” implemented in 2003, I propose to find the optimum level of reserves given a probability of default for the period 1997-2007. Likewise, in order to overcome the static feature of the previous issue, a possible dynamic extension is presented through the calculus of variations theory, appealing to a hypothetical situation in order to analyze the analytical results found. The most important result that is reached is that during the 90s the level of reserves studied is much lower than the optimum, while in the following decade this trend is reverted obtaining since 2007 an accumulation surplus on these assets. Finally, when incorporating the adjustment costs to the issue of optimization it was possible to obtain a “genuine” reserve feature, that is, a flow demand that represents the desired variations in the reserve stock.This allows inferring accumulation policies that the policy maker should apply, to obtain the desired optimum stock.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12086.

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Date of creation: Jul 2008
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Handle: RePEc:pra:mprapa:12086

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Keywords: Reservas Optimas; Default; Riesgo soberano;

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  1. Dani Rodrik, 2006. "The Social Cost of Foreign Exchange Reserves," NBER Working Papers 11952, National Bureau of Economic Research, Inc.
  2. Olivera, Julio H G, 1969. "A Note on the Optimal Rate of Growth of International Reserves," Journal of Political Economy, University of Chicago Press, vol. 77(2), pages 245-48, March/Apr.
  3. Aizenman, Joshua & Marion, Nancy P., 2003. "International Reserve Holdings with Sovereign Risk and Costly Tax Collection," Santa Cruz Center for International Economics, Working Paper Series qt9s7978n1, Center for International Economics, UC Santa Cruz.
  4. Aizenman, Joshua & LEE, JAEWOO, 2005. "International Reserves: Precautionary versus Mercantilist Views, Theory and Evidence," Santa Cruz Department of Economics, Working Paper Series qt2tn4w8x6, Department of Economics, UC Santa Cruz.
  5. Sebastian Edwards, 1953. "The Demand for International Reserves and Monetary Equilibrium: Some Evidence from Developing Countries," UCLA Economics Working Papers 293, UCLA Department of Economics.
  6. Feder, Gershon & Just, Richard E., 1977. "An analysis of credit terms in the eurodollar market," European Economic Review, Elsevier, vol. 9(2), pages 221-243.
  7. Clark, Peter B, 1970. "Optimum International Reserves and the Speed of Adjustment," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 356-76, March-Apr.
  8. Martin Feldstein, 1999. "Self-Protection for Emerging Market Economies," NBER Working Papers 6907, National Bureau of Economic Research, Inc.
  9. Frenkel, Jacob A & Jovanovic, Boyan, 1981. "Optimal International Reserves: A Stochastic Framework," Economic Journal, Royal Economic Society, vol. 91(362), pages 507-14, June.
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