Jordan’s International Reserve Position: Justifiably Strong

By Stanley B Watt, Donal McGettigan, Saade Chami

May 1, 2007

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Format: Chicago

Stanley B Watt, Donal McGettigan, and Saade Chami. Jordan’s International Reserve Position: Justifiably Strong, (USA: International Monetary Fund, 2007) accessed September 19, 2024

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

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: Capital inflows, Current account deficits, External debt, International reserves, Sudden stops

Keywords: FX deposit, Holdings compare, Optimal reserve, Reserve, WP

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2007/103
Stock No:

WPIEA2007103
ISBN:

9781451866674
ISSN:

1018-5941

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