Foreign Reserve Adequacy in Sub-Saharan Africa
IMF Working Papers, June 1, 2008
Source details
- Canonical URL
- Foreign Reserve Adequacy in Sub-Saharan Africa
Other formats
Bibliographic details
- Published: June 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870084.001
Research question and approach
- Examines adequacy of reserves in sub-Saharan African countries in light of the shocks these countries face.
- Notes that existing literature on optimal reserves has not focused on the particular shocks facing low-income countries.
- Uses a two-good endowment economy model facing terms of trade and aid shocks to derive the optimal level of reserves.
- Method: compares the cost of holding reserves with their benefits as an insurance against a shock.
Principal findings
- The optimal level of reserves depends upon:
- the size of terms of trade and aid shocks,
- their probability,
- the output cost associated with them.
Key statements and caveats
- 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."