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The Financial Crisis And Sizable International Reserves Depletion: From 'Fear Of Floating' To The ~Fear Of Losing International Reserves~?

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Executive Summary

In this paper the authors study the degree to which Emerging Markets (EMs) adjusted to the global liquidity crisis by drawing down their International Reserves (IR). Overall, they find a mixed and complex picture. Intriguingly, only about half of the EMs depleted their IR as part of the adjustment mechanism. To gain further insight, they compare the pre-crisis demand for IR of countries that experienced sizable IR depletion, to that of countries that did not, and find different patterns between the two groups.

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