International Reserve Adequacy in the Gambia

Author/Editor:

Eugen Tereanu

Publication Date:

September 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper applies intertemporal models of precautionary saving to compute an optimal level of international reserves for The Gambia. The analysis focuses on current account shocks specific to a low-income economy with a significant import component and complements a more standard, rule-of-thumb reserve adequacy assessment. The results suggest a central range from 4.5 months to 7 months of imports, which is broadly aligned with the recent actual coverage. Notwithstanding parameter sensitivity, the simulations allow for more informed policy decisions that balance flexibility with a prudent approach to reserve use.

Series:

Working Paper No. 2010/215

Subject:

Central banks Consumption Imports International reserves International trade National accounts Reserve positions Reserves accumulation Terms of trade

English

Publication Date:

September 1, 2010

ISBN/ISSN:

9781455208807/1018-5941

Stock No:

WPIEA2010215

Pages:

16

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