Description |
1 online resource (40 pages) : color illustrations |
Series |
IMF working paper ; WP/13/33 |
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IMF working paper ; WP/13/33.
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Contents |
Cover; Contents; I. Introduction; Figures; 1. Evolution of international reserves (minus gold) and public debt; A. Related Literature; II. A Three-Period Example; A. Environment; B. Results; III. Model; 2. Sequence of events when the government is not in default; A. Recursive Formulation; B. Recursive Equilibrium; IV. Calibration; Tables; 1. Parameter values; A. Computation; V. Quantitative Results; A. Model Simulations; B. Reserve Accumulation; 2. Simulation Results; C. Capital Flows Over the Cycle and during Sudden Stops; 3. Menus of spread and end-of-period debt levels |
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D. Role of Long-Duration Bonds4. Equilibrium borrowing and reserve accumulation policies; 5. Average gross capital flows; 3. Simulation Results with One-Period Bonds; 6. Effect of reserves on credit availability; 7. Effect of reserves on next-period default probability and borrowing; E. Role of Sudden Stops; F. Role of the Endogenous and Countercyclical Spread; 8. Mean debt and reserves for different sudden stop processes; G. Reserve Accumulation for Crisis Prevention; 4. Debt and Reserve Levels in a Model without Default and a Constant Spread; VI. Conclusions |
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5. Simulation Results when Reserves Reduce the Probability of a Sudden StopReferences; A. Appendix; A. Proof of Proposition 1; B. Sudden Stops; 9. Sudden stops in Mexico; 10. Sudden stops in selected countries; 11. Sudden stops in selected countries; 12. Sudden stops in selected countries; 6. Sudden-Stop Episodes |
Summary |
"Two striking facts about international capital flows in emerging economies motivate this paper: (1) Governments hold large amounts of international reserves, for which they obtain a return lower than their borrowing cost. (2) Purchases of domestic assets by nonresidents and purchases of foreign assets by residents are both procyclical and collapse during crises. We propose a dynamic model of endogenous default that can account for these facts. The government faces a trade-off between the benefits of keeping reserves as a buffer against rollover risk and the cost of having larger gross debt positions. Long-duration bonds, the countercyclical default premium, and sudden stops are important for the quantitative success of the model"--Abstract |
Notes |
Title from PDF title page (IMF Web site, viewed Feb. 5, 2013) |
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"IMF Institute for Capacity Development"--Page 2 of pdf |
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"January 2013"--Page 2 of pdf |
Bibliography |
Includes bibliographical references (pages 30-33) |
Notes |
English |
Subject |
Capital movements.
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Foreign exchange reserves.
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Default (Finance)
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BUSINESS & ECONOMICS -- Finance.
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Capital movements
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Default (Finance)
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Foreign exchange reserves
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Form |
Electronic book
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Author |
Hatchondo, Juan Carlos, author
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Martinez, Leonardo (Economist), author.
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International Monetary Fund. Institute for Capacity Development.
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ISBN |
9781475582413 |
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1475582412 |
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1475571291 |
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9781475571295 |
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