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    Foreign exchange reserves in a credit constrained economy

    Akdogan, Ersin (2010) Foreign exchange reserves in a credit constrained economy. Working Paper. Birkbeck College, University of London, London, UK.

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    We discuss the role of foreign exchange reserves as precautionary savings under an imperfect market framework due to the presence of endogenously determined borrowing constraints. We show that cost of holding reserves is higher in borrowing constrained economies than unconstrained ones as a result of the leverage effect of the debt. We also argue that high global reserve holdings can even be welfare reducing for the world economy where financially constrained developing countries are heavy borrowers in international lending markets.


    Item Type: Monograph (Working Paper)
    Additional Information: BWPEF 1014
    Keyword(s) / Subject(s): Foreign Exchange Reserves, Credit Constraints
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Depositing User: Administrator
    Date Deposited: 20 Jun 2013 11:10
    Last Modified: 20 Jun 2013 11:10


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