Regional Pooling of International Reserves: The Latin American Reserve Fund in Perspective

2014 ◽  
Vol 5 (1) ◽  
pp. 62-86 ◽  
Author(s):  
Luis D. Rosero
Keyword(s):  
Latin American ◽  
International Reserves ◽  
Reserve Fund

scholarly journals The need for official reserves in Latin America: assessing the precautionary motive, 1995-2011

2015 ◽  
Vol 34 (65) ◽  
pp. 327-347
Author(s):  
Moritz Cruz
Keyword(s):  
Latin America ◽  
Foreign Exchange ◽  
Latin American ◽  
International Reserves ◽  
Main Concern ◽  
Monetary Authorities ◽  
Precautionary Motive ◽  
Latin American Countries ◽  
Output Costs

In this paper we estimate the demand for official reserves in Latin America during the period 1995-2011. We assume that the main concern of the monetary authorities to demand reserves is the fear of suffering external drains, and its associated output costs. In other words, we attempt to show that the so-called precautionary motive drives the demand for international reserves in the region. Our econometric results confirm that Latin American countries demand ever increasing amounts of foreign exchange to protect themselves against the likelihood of external drains.

The New Drivers of Fear of Floating: Evidence from Latin America

2019 ◽  
Vol 0 (0) ◽  
Author(s):  
Jonathan Malagon ◽  
Camila Orbegozo
Keyword(s):  
Latin America ◽  
Exchange Rate ◽  
Latin American ◽  
Foreign Currency ◽  
Balance Sheet ◽  
Commodity Prices ◽  
Exchange Rate Policy ◽  
International Reserves ◽  
Lender Of Last Resort ◽  
Fear Of Floating

Abstract There exists a consensus in the literature that during the 90s the main reason for fear of floating in emerging economies was the excessive liabilities dollarization, both in private and public sectors, which resulted in central banks’ interventions over the exchange rate. The main objective of these interventions was preventing the negative balance sheet effects originated by currency depreciations. Latin America certainly fits in this description, as convincingly documented by Calvo and Reinhart (Calvo, Guillermo A., and Carmen M. Reinhart. 2002. “Fear of Floating.” Quarterly Journal of Economics 117 (2): 379–408.). However, Latin American economies have reduced their debt in foreign currency since the early 2000s. Moreover, these economies extensively increased their amount of international reserves in the last decade and some of them – like Colombia and Mexico – have even reached the IMF’s flexible credit line, which operates as an international lender of last resort. All these changes – lower liability dollarization, higher international reserves, and new collaterals – suggest that the fear of devaluating in Latin America should be lower. Nevertheless, floating has not been the decision in terms of exchange rate policy. Conversely, most of Latin American countries that announced free floating opted for managed floating regimes and discretional interventions, in what can be considered as a new era of fear of floating. This paper finds empirical evidence that the main motivation for fear of floating has changed during the recent boom in commodity prices, 2005–2013, when foreign exchange interventions under flexible regimes were focused on avoiding excessive currency appreciations and apparently preventing Dutch disease.

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