A Fiscal Price Tag for International Reserves

Author/Editor:

David Hauner

Publication Date:

April 1, 2005

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 examines the (quasi-)fiscal impact of the (opportunity) cost of international reserves. It proposes a conceptual framework, with particular emphasis on two hitherto somewhat neglected aspects: a more appropriate measure of gross opportunity cost, and potential savings from lower external debt spreads that countries "buy" by holding reserves. The framework is then applied to 100 countries over 1990-2004. The results suggest that a turning point has been reached in recent years: while most countries made money on their reserves during 1990-2001, most have been losing money during 2002-04.

Series:

Working Paper No. 2005/081

Subject:

External debt International reserves Public investment and public-private partnerships (PPP) Reserve assets Reserve currencies

English

Publication Date:

April 1, 2005

ISBN/ISSN:

9781451861006/1018-5941

Stock No:

WPIEA2005081

Pages:

29

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