European Parliament Library

Precautionary Reserves :, An Application to Bolivia, Fabian Valencia

Using precautionary savings models we compute levels of optimal reserves for Bolivia. Because of Bolivia's reliance on commodity exports and little integration with capital markets, we focus on current account shocks as the key balance of payments risk. These models generate an optimal level of net foreign assets ranging from 29 to 37 percent of GDP. For comparison purposes, we contrasted these results with standard rule of thumb measures of reserve adequacy, which in the case of Bolivia resulted in substantially lower levels of adequate reserves. These differing results emphasize the need to appropriately account for country-specific risks in order to derive adequate measures of reserve buffers
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Bolivia: External Sector Developments; 1. Bolivia: Selected External Sector Varialbles; 2. Terms of Trade; III. The Model; A. The Optimal Level of Reserves; 3. Optimal Reserves and Risk; IV. Numerical Solution; 4. Consumption Rule; 5. Optimal and Actual Financial System Net Foreign Assets; V. Adding Investment; A. Solution; 6. Optimal Decision Rules with Investment; 7. Optimal and Actual NFA With and Without Investment; VI. Sensitivity Analysis; 1. Sensitivity Analysis: Optimal Reserves; VII. Other Banchmarks
Literary Form
non fiction
"March 2010."
Physical Description
1 online resource (38 p.)
Specific Material Designation
Form Of Item

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