Quarterly Journal of Economics Vol. 141 No. 3 2026
International Reserve Management Under Rollover Crises
Abstract
This article investigates how a government should manage international reserves when it faces the risk of a rollover crisis. We ask: Should the government accumulate reserves or reduce debt to make itself less vulnerable? We show that the optimal policy entails initially reducing debt, followed by a subsequent increase in both debt and reserves as the government approaches a safe zone. Furthermore, we find that issuing additional debt to accumulate reserves can lead to a reduction in sovereign spreads. Evidence from a panel of emerging economies is consistent with these predictions: increases in reserves financed by public external borrowing are associated with lower spreads, and reserve holdings are not systematically drawn down during crisis episodes.
- DOI
- 10.1093/qje/qjag025
- Volume
- 141
- Issue
- 3
- Pages
- 2269-2311
- Language
- en
- Sources
- openalex crossref