Precautionary motives drive rapid build-up of reserves in EMEs, says IMF paper


Precautionary demand against current and capital account shocks as well as the undervaluation of exchange rates explains the rapid accumulation of international reserve by emerging market countries, according to an International Monetary Fund paper published on January 27.

Atish Ghosh, Jonathan Ostry and Charalambos Tsangarides, the paper's authors, examine why emerging market economies have been stockpiling international reserves. They say that while vulnerability to current account shocks was

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