Selected Issues Papers

Financial Buffers in a Euroized Economy: Republic of Kosovo

By Javier Kapsoli, Ezgi O. Ozturk

January 16, 2025

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Format: Chicago

Javier Kapsoli, and Ezgi O. Ozturk "Financial Buffers in a Euroized Economy: Republic of Kosovo", Selected Issues Papers 2025, 003 (2025), accessed February 11, 2025, https://0-doi-org.library.svsu.edu/10.5089/9798400298073.018

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Summary

This paper analyzes reserve adequacy measurement in Kosovo, where euro serves as the legal tender. The study adapts the IMF's Assessing Reserve Adequacy framework to Kosovo's unique monetary context, focusing on precautionary motives for holding reserves. The analysis reveals limited readily available reserves at the Central Bank of Kosovo and recommends additional government deposits of 1.75-5.75 percent of GDP. Given the significant opportunity costs of maintaining such deposits, the paper suggests alternative solutions, including exploring a private lender of last resort model and maintaining ECB repo lines.

Subject: Central Banks, Currencies, Financial crises, International reserves, Lender of last resort, Money

Keywords: Bank deposits, Central bank reserves, Currencies, ECB repo line, Euroization, Euroized economy, Foreign exchange reserves, Global, Government deposit, International reserves, Kosovo, Lender of last resort, Lender of last resort model, Liquidity buffers, Monetary policy, Reserve adequacy

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