Official accumulation of foreign reserves may be perceived as interventions to influence the exchange rate, undermining the credibility of floating exchange rates and inflation targets. This paper develops a theoretical framework to study the interaction between reserve accumulation and monetary...

Trends in the size of U.S. government are examined. In the postwar period, general government primary spending rose by ¼ percent of GDP a year through 1975, stabilizing thereafter. With higher social transfers offset by a lower burden of defense spending, expansion reflected a baby-boom...

Official accumulation of foreign reserves may be perceived as interventions to influence the exchange rate, undermining the credibility of floating exchange rates and inflation targets. This paper develops a theoretical framework to study the interaction between reserve accumulation and monetary...

This paper extends the framework derived by Jeanne and Rancière (2006) by explicitly incorporating the dollarization of bank deposits into the analysis of the optimal level of foreign reserves for prudential purposes. In the extended model, a sudden stop in capital flows occurs in tandem with a...

We investigate the role of financial dollarization in the determination of real interest rates in emerging economies. In a simple analytical model, we show that a strategy of "dedollarizing" the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real...