One important lesson of the crisis is the need to take a systemic view of measures aimed at financial stability. Measures that enhance the stability of a single institution could be inimical to the stability of the financial system as a whole

In this paper we connect the events of the last twelve months, "The Panic of 2008" as it has been called, to the demand for international reserves. In previous work, we have shown that international reserve demand can be rationalized by a central bank's desire to backstop the broad money supply...