Paper explores reserve management in closed economies
Working paper published by IMF presents intertemporal optimisation model
Governments "seem excessively cautious" in their use of reserves, according to a working paper published by the International Monetary Fund.
In Optimal reserves in financially closed economies, Olivier Jeanne and Damiano Sandri construct an intertemporal optimisation model, which they calibrate using data from 21 developing countries from 1960 to 2014.
Their model "suggests a more active use of reserves" in response to current account shocks. "The welfare gains from reserves management come from
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