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Capital Inflows and Reserve Accumulation: The Recent Evidence

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  • Carmen M. Reinhart
  • Vincent R. Reinhart

Abstract

Over the past decade, policymakers in many emerging market economies have opted to limit fluctuations of the value of their domestic currencies relative to the U.S. dollar. A simple interest-parity relationship is used to identify the potential sources of upward pressure on the value of a foreign exchange rate and to explain the policy options to damp them. The paper then documents the extent to which the accumulation of foreign exchange reserves has been sterilized and provides a comprehensive list of major policy initiatives related to stemming forces that would otherwise appreciate the exchange rate in over one hundred countries. This examination of policy efforts shows that a wide variety of tools are used in the attempt to stem the tide of capital flows.

Suggested Citation

  • Carmen M. Reinhart & Vincent R. Reinhart, 2008. "Capital Inflows and Reserve Accumulation: The Recent Evidence," NBER Working Papers 13842, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13842
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    References listed on IDEAS

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    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F0 - International Economics - - General
    • F3 - International Economics - - International Finance

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