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Too Much of a Good Thing?: The Adequacy of International Reserves in the Aftermath of Crises

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  • Graham Bird

    (University of Surrey, Guildford, UK)

  • Ramkishen Rajan

    (School of Economics, University of Adelaide, Australia)

Abstract

This paper has a number of purposes. First, it revisits the older theory of reserve adequacy and optimality to see whether this can still be used and perhaps strengthened in ways that would inform the current debate. Second, it explores the connection between reserve adequacy and currency crisis in the light of recent experience and empirical research. Third, it critically investigates alternative rule‐of‐thumb measures of reserve adequacy. Fourth, and drawing on the foregoing analysis, it examines the extent to which crisis countries should seek to replenish and build up their international reserves in the post‐crisis period. Additional owned reserves represent a guaranteed and unconditional source of liquidity; is this what is needed?
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Suggested Citation

  • Graham Bird & Ramkishen Rajan, 2002. "Too Much of a Good Thing?: The Adequacy of International Reserves in the Aftermath of Crises," Centre for International Economic Studies Working Papers 2002-10, University of Adelaide, Centre for International Economic Studies.
    • Handle: RePEc:adl:cieswp:2002-10
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    File URL: http://www.adelaide.edu.au/cies/papers/0210.pdf
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    References listed on IDEAS

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