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International Reserve Management under Rollover Crises

Author

Listed:
  • Mauricio Barbosa-Alves
  • Javier Bianchi
  • César Sosa-Padilla

Abstract

This paper develops a framework to study the management of international reserves when a government faces the risk of a rollover crisis. In the model, it is optimal for the government to reduce its vulnerability by initially lowering debt, and then increasing both debt and reserves as it approaches a safe zone. Furthermore, we find that issuing additional debt to accumulate reserves can lead to a reduction in sovereign spreads.

Suggested Citation

  • Mauricio Barbosa-Alves & Javier Bianchi & César Sosa-Padilla, 2024. "International Reserve Management under Rollover Crises," NBER Working Papers 32393, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32393
    Note: IFM
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    1. Harold Cole & Daniel Neuhann & Guillermo Ordonez, 2022. "Information Spillovers and Sovereign Debt: Theory Meets the Eurozone Crisis," PIER Working Paper Archive 22-017, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    2. Harold Cole & Daniel Neuhann & Guillermo Ordoñez, 2022. "Asymmetric Information and Sovereign Debt: Theory Meets Mexican Data," Journal of Political Economy, University of Chicago Press, vol. 130(8), pages 2055-2109.
    3. Juan Carlos Conesa & Timothy J. Kehoe, 2017. "Gambling for redemption and self-fulfilling debt crises," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 64(4), pages 707-740, December.
    4. Cristina Arellano, 2008. "Default Risk and Income Fluctuations in Emerging Economies," American Economic Review, American Economic Association, vol. 98(3), pages 690-712, June.
    5. Conesa, Juan Carlos & Kehoe, Timothy J., 2024. "Preemptive austerity with rollover risk," Journal of International Economics, Elsevier, vol. 150(C).
    6. Jonathan Eaton & Mark Gersovitz, 1981. "Debt with Potential Repudiation: Theoretical and Empirical Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(2), pages 289-309.
    7. Harold L. Cole & Timothy J. Kehoe, 2000. "Self-Fulfilling Debt Crises," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(1), pages 91-116.
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    Cited by:

    1. Maeng, F. S., 2024. "Default, Inflation Expectations, and the Currency Denomination of Sovereign Bonds," Cambridge Working Papers in Economics 2438, Faculty of Economics, University of Cambridge.

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    More about this item

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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