Publication:
International Reserves and Central Bank Independence

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dc.contributor.authorSamano, Agustin
dc.date.accessioned2021-11-04T18:14:03Z
dc.date.available2021-11-04T18:14:03Z
dc.date.issued2021-11
dc.description.abstractThis paper proposes a novel theory of reserve accumulation that emphasizes the role of an independent central bank. Motivated by a positive correlation between reserve accumulation and central bank independence in Latin America, the paper develops a quantitative sovereign default model with an independent central bank that can accumulate a risk-free foreign asset. The findings show that if the central bank is more patient than the government and as patient as households are, in equilibrium, the government issues more debt than what is socially optimal, and the central bank accumulates reserves to undo government over-borrowing. A key insight is that the government can issue more debt for any level of reserves but chooses not to because doing so would increase sovereign spreads, making it more costly to borrow. Quantitatively, the analysis finds that the central bank independence channel accounts for 75 percent of the average reserve levels observed in Mexico from 1994 to 2017. Finally, the paper shows that accumulating reserves improves social welfare. Welfare gains come from reducing the costs of front-loading public spending.en
dc.identifierhttp://documents.worldbank.org/curated/undefined/620131635859663291/International-Reserves-and-Central-Bank-Independence
dc.identifier.doi10.1596/1813-9450-9832
dc.identifier.urihttps://hdl.handle.net/10986/36483
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 9832
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectINTERNATIONAL RESERVES
dc.subjectCENTRAL BANK INDEPENDENCE
dc.subjectSOVEREIGN DEBT
dc.subjectRESERVE ACCUMULATION
dc.subjectEXCHANGE RATE REGIME
dc.subjectCURRENCY
dc.titleInternational Reserves and Central Bank Independenceen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleInternational Reserves and Central Bank Independence
okr.date.disclosure2021-11-02
okr.date.doiregistration2025-04-10T11:13:26.907991Z
okr.date.lastmodified2021-11-02T00:00:00Zen
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/undefined/620131635859663291/International-Reserves-and-Central-Bank-Independence
okr.guid620131635859663291
okr.identifier.doi10.1596/1813-9450-9832
okr.identifier.externaldocumentum090224b088b0db7c_1_0
okr.identifier.internaldocumentum33571526
okr.identifier.reportWPS9832
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/620131635859663291/pdf/International-Reserves-and-Central-Bank-Independence.pdfen
okr.region.administrativeLatin America & Caribbean
okr.region.countryMexico
okr.topicPublic Sector Development::Public Financial Management
okr.topicFinance and Financial Sector Development::Currencies and Exchange Rates
okr.topicFinance and Financial Sector Development::Debt Markets
okr.topicFinance and Financial Sector Development::Strategic Debt Management
okr.topicInternational Economics and Trade::External Debt
okr.unitDevelopment Research Group, Development Economics
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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