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Reserve accumulation and financial crises: From individual protection to systemic risk

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  • Steiner, Andreas

Abstract

This paper provides a new perspective on the relationship between countries׳ international reserve holdings and financial crises: while the “local” view holds that reserves may prevent domestic crises, it overlooks that the accumulation of reserves relaxes the financing constraint of the reserve currency country and may cause a financial crisis in the centre, which is transmitted globally. According to this “global” view reserve accumulation might destabilize the international financial system. Since the crisis affects all countries alike, the accumulation of reserves imposes a negative externality on non-accumulating countries.

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  • Steiner, Andreas, 2014. "Reserve accumulation and financial crises: From individual protection to systemic risk," European Economic Review, Elsevier, vol. 70(C), pages 126-144.
    • Handle: RePEc:eee:eecrev:v:70:y:2014:i:c:p:126-144
    DOI: 10.1016/j.euroecorev.2014.04.005
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    2. Ngo, Vu Minh & Nguyen, Phuc Van & Hoang, Yen Hai, 2024. "The impacts of geopolitical risks on gold, oil and financial reserve management," Resources Policy, Elsevier, vol. 90(C).
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    4. Margarita Irizepova, 2015. "Methods of State’s Reaction to Risks of State Finances Management," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 129-136.
    5. Dongwon Lee, 2023. "International cooperation in foreign reserve policies in the presence of competitive hoarding," Review of International Economics, Wiley Blackwell, vol. 31(2), pages 389-412, May.
    6. Florian Brugger, 2016. "Asias Reserve Accumulation: Part of a New Paradigm," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 6(8), pages 457-476, August.
    7. Thiago Christiano Silva & Solange Maria Guerra & Michel Alexandre da Silva & Benjamin Miranda Tabak, 2018. "Interconnectedness, Firm Resilience and Monetary Policy," Working Papers Series 478, Central Bank of Brazil, Research Department.
    8. Mr. Anton Korinek, 2011. "The New Economics of Capital Controls Imposed for Prudential Reasons+L4888," IMF Working Papers 2011/298, International Monetary Fund.
    9. repec:grz:wpsses:2015-03 is not listed on IDEAS
    10. D. Essers & E. Vincent, 2017. "The global financial safety net :In need of repair ?," Economic Review, National Bank of Belgium, issue ii, pages 87-112, september.
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    More about this item

    Keywords

    Financial crises; Global imbalances; International reserves; Macro-prudential policies; Systemic risk;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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