Jordan’s International Reserve Position: Justifiably Strong
IMF Working Papers, May 1, 2007
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- Jordan’s International Reserve Position: Justifiably Strong
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Bibliographic details
- Authors: Stanley B Watt, Donal McGettigan, Saade Chami
- Published: May 1, 2007
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451866674.001
Summary and main conclusion
- Jordan has seen a large increase in its international reserve holdings in recent years.
- Determining optimal reserve levels under a fixed exchange rate regime is not straightforward.
- 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.
Analytical approach and Methods
- Comparative analysis using several traditional measures of reserves adequacy to compare Jordan's reserve holdings with other emerging market (EM) countries.
- A reserves-optimizing model based on Jeanne and Ranciere (2006) (J-R), extended to allow reserve holdings to influence the likelihood of a sudden stop.
Key findings
- Traditional reserves adequacy measures indicate that Jordan’s reserves have expanded substantially relative to many EM comparators.
- The extended J-R reserves-optimizing model implies that higher reserve holdings reduce the likelihood of a sudden stop.
- Combining traditional measures and the optimized-model results, Jordan’s reserve position is judged sufficient to:
- Sustain the dinar peg.
- Deal with the most extreme capital account disruptions.
Subject tags and keywords
- Subjects: Capital inflows, Current account deficits, External debt, International reserves, Sudden stops
- Keywords: FX deposit, holdings compare, optimal reserve, reserve, WP