International Reserve Trends in the South Caucasus and Central Asia Region
February 1, 2008
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Summary
In recent years, the South Caucasus and Central Asia countries (CCA-6) have received significant foreign exchange inflows. While a healthy reserve buffer is desirable to selfinsure against external crises, holding international reserves also involves costs. We analyze the adequacy of CCA-6 reserves using widely recognized rules of thumb, and simulate optimal reserve levels applying the Jeanne (2007) model. Both the adequacy measures and the model-based simulations indicate that, with the exception of Tajikistan, CCA-6 reserves had increased to broadly comfortable levels by 2006. More recently, reserve adequacy has been tested in Kazakhstan, which has been affected by the 2007 global liquidity crunch.
Subject: External debt, Financial crises, Foreign exchange, International capital markets, International reserves
Keywords: CCA-6, reserve, reserve holding, WP
Pages:
27
Volume:
2008
DOI:
Issue:
041
Series:
Working Paper No. 2008/041
Stock No:
WPIEA2008041
ISBN:
9781451869033
ISSN:
1018-5941
