2026/05/12 by Mauricio Barbosa-Alves, Javier Bianchi, César Sosa‐Padilla · 1 voice
Business, Management and Accounting · Economics, Econometrics and Finance · Energy · #Global Energy and Sustainability Research #Natural Resources and Economic Development #State Capitalism and Financial Governance
paper · doi:10.1093/qje/qjag025
openalex created_date 2025/10/10 · openalex publication_date 2026/05/12 · openalex updated_date 2026/07/30
Abstract This article investigates how a government should manage international reserves when it faces the risk of a rollover crisis. We ask: Should the government accumulate reserves or reduce debt to make itself less vulnerable? We show that the optimal policy entails initially reducing debt, followed by a subsequent increase in both debt and reserves as the government approaches a safe zone. Furthermore, we find that issuing additional debt to accumulate reserves can lead to a reduction in sovereign spreads. Evidence from a panel of emerging economies is consistent with these predictions: increases in reserves financed by public external borrowing are associated with lower spreads, and reserve holdings are not systematically drawn down during crisis episodes.