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http://hdl.handle.net/10419/64088
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| Title: | | International reserves and swap lines: Substitutes or complements?  |
| Authors: | | Aizenman, Joshua Jinjarak, Yothin Park, Donghyun |
| Issue Date: | | 2010 |
| Series/Report no.: | | Working Papers, Santa Cruz Center for International Economics 10-03 |
| Abstract: | | Developing Asia experienced a sharp surge in foreign currency reserves prior to the 2008-9 crisis. The global crisis has been associated with an unprecedented rise of swap agreements between central banks of larger economies and their counterparts in smaller economies. We explore whether such swap lines can reduce the need for reserve accumulation. The evidence suggests that there is only a limited scope for swaps to substitute for reserves. The selectivity of the swap lines indicates that only countries with significant trade and financial linkages can expect access to such ad hoc arrangements, on a case by case basis. Moral hazard concerns suggest that the applicability of these arrangements will remain limited. However, deepening swap agreements and regional reserve pooling arrangements may weaken the precautionary motive for reserve accumulation. |
| Subjects: | | reserves swaps dollar standard Asia trade and financial linkages |
| JEL: | | F15 F31 F32 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Papers, Santa Cruz Institute for International Economics, UC Santa Cruz
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