(ii) is redistributive in favor of the (borrowing-constrained) poor, by targeting an inflation measure that overweighs the …

inflows in Emerging Market Economies (EMEs). We introduce a novel theory that identifies an additional rationale for reserve … constrained efficient equilibrium. We test our theory using data from 34 EMEs over the period 1999-2019. The findings support our … theory, as countries with more restrictions on gross capital outflows tend to accumulate larger reserves in response to …