Reserve Adequacy in Emerging Market Economics.

This paper analyzes reserve adequacy in emerging market countries. It argues that the old rule of thumb of maintaining reserves equivalent to three months of imports has become obsolete and that, instead, a new benchmark is needed which takes into account the increased importance of capital flows. T...

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Bibliographic Details
Corporate Author: International Monetary Fund
Format: Journal
Language:English
Published: Washington, D.C. : International Monetary Fund, 2001.
Series:IMF Working Papers; Working Paper ; No. 2001/143
Online Access:Full text available on IMF
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520 3 |a This paper analyzes reserve adequacy in emerging market countries. It argues that the old rule of thumb of maintaining reserves equivalent to three months of imports has become obsolete and that, instead, a new benchmark is needed which takes into account the increased importance of capital flows. The paper suggests such a benchmark, consisting of the sum of short-term debt on a residual maturity basis (the external drain) and an allowance for possible capital flight (the internal drain), taking into account differences in country risk and exchange rate regime. 
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