Optimal Reserves in the Eastern Caribbean Currency Union
April 1, 2009
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Summary
Recent turbulence in global and Caribbean regional financial markets underscore the importance of reassessing the adequacy of international reserves held by the Eastern Caribbean Central Bank (ECCB). Using the Jeanne (2007) optimization framework, this paper finds that international reserves held by the ECCB are generally adequate for a variety of external current account and capital account shocks. However, the ECCB would be challenged in the event of moderate to severe deposit outflows.
Subject: Capital account, Current account, External debt, International reserves, Monetary base
Keywords: opportunity cost, reserve, reserve cover rule, WP
Pages:
20
Volume:
2009
DOI:
Issue:
077
Series:
Working Paper No. 2009/077
Stock No:
WPIEA2009077
ISBN:
9781451872248
ISSN:
1018-5941
