Jordan's International Reserve Position: Justifiably Strong

 
Author/Editor: Chami, Saade ; McGettigan, Donal ; Watt, Stanley
 
Publication Date: May 01, 2007
 
 
Summary: Jordan has seen a large increase in its international reserve holdings in recent years. While a healthy reserve buffer is needed under a fixed exchange rate regime, determining optimal reserve levels is not straightforward. In this paper, we first use several traditional measures of reserves adequacy to compare Jordan's reserve holdings with other emerging market (EM) countries. Subsequently, we analyze Jordan's reserve holdings using a reserves-optimizing model, based on Jeanne and Ranciere (2006) (J-R), but extended to allow reserve holdings to influence the likelihood of a sudden stop. The overall analysis suggests that Jordan's reserve holdings provide sufficient support to sustain the dinar peg and to deal with the most extreme capital account disruptions.
 
Subject(s): Reserves accumulation | Jordan | Capital flows | Exchange rate stability | External shocks

Author's Keyword(s): Foreign reserves | sudden steps | capital flow
 
English
Publication Date: May 01, 2007
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2007103 Pages: 19
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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