Optimal Foreign Reserves and Central Bank Policy under Financial Stress
研究了开放经济在金融压力下，企业和家庭通过银行借入外债，金融约束导致利率上升和汇率贬值，央行积累外汇储备以提供国际流动性的最优策略。
We study foreign reserves accumulation and liquidity policy in an open economy under financial stress. Firms and households finance investment and consumption by borrowing from banks, which borrow from abroad. Binding financial constraints cause the domestic interest rate to rise over the world rate and the exchange rate to depreciate, implying inefficiently low investment and consumption. A role emerges for a central bank that accumulates reserves to provide international liquidity when financial frictions bind. Our analysis yields novel insights on the determinants of optimal reserves accumulation cum liquidity provision and their role vis-à-vis capital flow management policies.