Optimal Reserves in the Eastern Caribbean Currency Union
International Monetary Fund, Apr 1, 2009 - Business & Economics - 20 pages
We identify structural breaks in economic growth in 140 countries and use these to define "growth spells: " periods of high growth preceded by an upbreak and ending either with a downbreak or with the end of the sample. Growth spells tend to be shorter in African and Latin American countries than elsewhere. We find that growth duration is positively related to: the degree of equality of the income distribution; democratic institutions; export orientation (with higher propensities to export manufactures, greater openness to FDI, and avoidance of exchange rate overvaluation favorable for duration); and macroeconomic stability (with even moderate instability curtailing growth duration)
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80 percent Actual reserves adverse capital movements bank deposits Bank Run banking system benchmark broad money capital account shocks Caribbean Central Bank CFA Franc Zone cost of holding currency crisis current account shocks demand liabilities deposit outflows Eastern Caribbean Central ECCB ECCU countries estimates fixed exchange rate Floerkemeir foreign currency deposits foreign reserves Fund staff calculations holding reserves IMF Working Paper income elasticity insure the region interest rate international capital markets International Financial International Financial Statistics International Monetary Fund international reserve holdings Jeanne Lender of Last level of reserves monetary base months of imports natural disasters opportunity cost Optimal International Reserves optimal level optimal reserves output loss percent of bank percent of demand percent of GDP potential quasi-currency board reserve adequacy measures reserve cover rule reserve levels reserve money reserves to withstand Risk aversion shock equivalent short-term external debt sudden stop tourism dependent economies Uruguay WAEMU Washington DC withstand a shock