Reserve accumulation can be inflationary, ECB paper says
Working paper examines allocation of special drawing rights in 2009
An increase in international reserves can be inflationary, according to a working paper published by the European Central Bank (ECB) today (January 25).
In Reserve accumulation, inflation and moral hazard: Evidence from a natural experiment, Livia Chițu says inflation could stem from the "imperfect" sterilisation of the increase in reserve holdings, or the moral hazard that emerges as public authorities "become more complacent" in the face of their "perceived safety".
To separate out the two
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