International reserves and swap lines in times of financial distress: Overview and interpretations

Arbeitspapier

In this paper I review the use of precautionary measures aimed at mitigating emerging markets' exposure to fragility associated with financial integration. The discussion draws possible lessons from the ongoing global liquidity crisis. The fear of losing international reserves (IR) constrained most emerging markets more than the fear of floating. The fear of using IR during a crisis suggests that emerging markets (EMs) opt to revisit the gains from financial globalization. High levels of IR may be required for the self insurance offered by those reserves to be effective. Under such circumstances, countries may benefit by supplementing the hoarding of IR with Pigovian tax-cum-subsidy policies. These policies would reduce external borrowing, and would fund the marginal hoarding of IR. The fear of losing IR also suggests a greater demand for regional pooling arrangements and swap lines as well as possible new roles for international financial institutions (IFI).

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ADBI Working Paper ; No. 192

Classification and Topics

• Classification: Wirtschaft ; Economic Integration ; International Investment; Long-term Capital Movements ; Current Account Adjustment; Short-term Capital Movements ; Financial Aspects of Economic Integration ; International Financial Markets
• Subject: Finanzmarktkrise ; Währungsreserven ; Internationales Abkommen ; Swap ; Asien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Aizenman, Joshua
• Event: Veröffentlichung
• (who): Asian Development Bank Institute (ADBI)
• (where): Tokyo
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/53691
• Last update: 10.03.2025, 11:45 AM CET