International Economics

<< N°130

  N°130  
Issue Q2 2012  
Foreign exchange reserves in a credit constrained economy  
Kurmaș Akdoğan
 
We discuss the role of foreign exchange reserves as precautionary savings under an imperfect market framework due to the presence of endogenously determined borrowing constraints. We show that cost of holding reserves is higher in borrowin constrained economies than unconstrained ones as a result of the leverage effect of the debt. Abstract

   
Foreign Exchange Reserves ; Credit Constraints ; Keywords
F32 ; F34 ; JEL classification
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