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


  • Germán Alarco Tosoni

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


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.

Suggested Citation

  • Germán Alarco Tosoni, 2011. "Necessary Levels, Costs and Policies for International Reserves in Latin America," Economía Mexicana NUEVA ÉPOCA, , vol. 0(1), pages 145-180, January-J.
  • Handle: RePEc:emc:ecomex:v:20:y:2011:i:1:p:145-180

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

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • Y - Miscellaneous Categories
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications


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