International Reserve Management Under Rollover Crises
Abstract
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.
Fields of Study & Subjects
Natural Resources and Economic Development
Global Energy and Sustainability Research
State Capitalism and Financial Governance
Publication details
- Journal / source
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Volume
- 141
- Issue
- 3
- Pages
- 2269–2311
- Publication date
- 12 May 2026
- Language
- EN