Nearly two years after the onset of the financial crises, many central banks have brought their policy interest rates down to, or close to zero. Various governments have seen their budget deficits soar. Both policies have affected exchange rates, partly through market expectations. With a...

Reserve requirements are a prominent policy instrument in many emerging countries. The present study investigates the circumstances under which reserve requirements are an appropriate policy tool for price or financial stability. We consider a small open economy model with sticky prices,...

The notable increase in international reserve holdings over the past decade and their use during the global financial crisis of 2008/2009 has sparked renewed interest in the analysis of the optimal level of reserve holdings, in particular in countries which are subject to sudden stops. Less...