Precautionary Reserves: An Application to Bolivia
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
Using precautionary savings models we compute levels of optimal reserves for Bolivia. Because of Bolivia's reliance on commodity exports and little integration with capital markets, we focus on current account shocks as the key balance of payments risk. These models generate an optimal level of net foreign assets ranging from 29 to 37 percent of GDP. For comparison purposes, we contrasted these results with standard rule of thumb measures of reserve adequacy, which in the case of Bolivia resulted in substantially lower levels of adequate reserves. These differing results emphasize the need to appropriately account for country-specific risks in order to derive adequate measures of reserve buffers.
Series:
Working Paper No. 2010/054
Subject:
Consumption External debt Foreign assets Income Terms of trade
English
Publication Date:
March 1, 2010
ISBN/ISSN:
9781451963502/1018-5941
Stock No:
WPIEA2010054
Pages:
25
Please address any questions about this title to publications@imf.org