Optimal Reserves in the Eastern Caribbean Currency Union
IMF Working Papers, April 1, 2009
Source details
- Canonical URL
- Optimal Reserves in the Eastern Caribbean Currency Union
Other formats
Bibliographic details
- Authors: Wendell A. Samuel, Emilio Pineda, Mario Dehesa
- Published: April 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451872248.001
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.
Methodology
- Framework used: Jeanne (2007) optimization framework.
Findings
- International reserves held by the ECCB are generally adequate for a variety of external current account and capital account shocks.
- The ECCB would be challenged by moderate to severe deposit outflows.
Policy implications / Recommendations
- Reassess adequacy of international reserves in light of recent global and regional financial market turbulence.
- Account explicitly for the risk of moderate to severe deposit outflows when setting reserve targets.