2013年-IMF国际货币组织全球_International_Reserves_and_Rollover_Risk_40页_1mb

Summary of "International Reserves and Rollover Risk"

Core Content

This paper investigates the role of international reserves in emerging economies, focusing on two key empirical facts:

1. Fact 1: Rate of Return Dominance
   Governments hold large amounts of international reserves, which yield a return lower than their borrowing cost.

2. Fact 2: Gross Capital Flows Dynamics
   Purchases of domestic assets by nonresidents and purchases of foreign assets by residents are both procyclical and collapse during financial crises.

The authors propose a dynamic model of sovereign default that integrates the concept of international reserves and long-duration bonds to explain these facts.

Main Points

1. Theoretical Framework

• The model is based on a sovereign defaultable debt framework (Eaton and Gersovitz, 1981), extended to include international reserves.
• The government is benevolent, aiming to maximize expected utility from consumption.
• The government can issue long-duration bonds (non-contingent bonds with geometrically decaying coupons) and accumulate reserves (risk-free assets).
• A sudden-stop shock is modeled as an exogenous event that halts borrowing and reduces income.
• The sovereign spread (the difference between the interest rate on government debt and the risk-free rate) reflects the default premium and the rollover risk.

2. Key Model Results

• Reserve accumulation is optimal only in the presence of rollover risk and long-duration bonds.
• If rollover risk is absent or debt is short-term, reserve accumulation is not beneficial.
• Long-duration bonds allow the government to smooth consumption across periods by transferring resources from future to present, even in the absence of default.
• Reserves serve as a buffer against rollover risk, enabling the government to smooth consumption during sudden stops.
• The financial cost of holding reserves is offset by the benefit of reducing rollover risk.

3. Quantitative Implications

• The model is calibrated using Mexico as a reference.
• The average reserve holdings in the model are equivalent to 2/3 of the short-term debt that matures in one year.
• Reserve accumulation is consistent with the "Greenspan-Guidotti rule" (full short-term debt coverage).
• Sudden-stop episodes are associated with a drop in capital flows and a reduction in borrowing, with reserves used to smooth consumption.
• Long-duration bonds are crucial for hedging rollover risk and allowing reserve accumulation to be beneficial.
• The countercyclical default premium plays a significant role in shaping the sovereign spread and reserve accumulation behavior.

4. Empirical Relevance

• The model captures the procyclical nature of capital flows, as both inflows and outflows collapse during crises.
• Reserve accumulation is primarily motivated by precautionary reasons to manage balance of payment crises.
• The precautionary role of reserves is highlighted, as they are used to smooth consumption during sudden stops.
• The IMF Survey of Reserve Managers indicates that 80% of respondents cite liquidity needs as the main reason for reserve accumulation.

Key Information

• Reserves are held even though they yield a lower return than the government's borrowing cost, because they provide insurance against future rollover risk.
• Sudden stops are modeled as exogenous shocks that temporarily prevent borrowing and reduce income.
• The government's decision to default is influenced by the expected marginal benefit and cost of using reserves.
• The sovereign spread is countercyclical, reflecting lower default risk during good times and higher risk during bad times.
• The model is consistent with empirical findings that show the joint accumulation of debt and reserves in emerging economies.
• The introduction of long-duration bonds allows the government to accumulate reserves and smooth consumption over time.
• The benchmark calibration shows that reserves are not held significantly with one-period debt, but are held with long-duration debt.

Structure of the Paper

• I. Introduction

  • Motivation: The global financial crisis highlighted the importance of international capital flows.
  • Empirical facts: Reserves yield lower returns than borrowing costs; capital flows are procyclical.

• A. Related Literature

  • Reviews the existing literature on sovereign default and international reserves.
  • Notes that previous studies typically do not allow for joint accumulation of assets and liabilities.
  • Emphasizes the precautionary role of reserves and the importance of long-duration bonds.

• II. A Three-Period Example

  • Illustrates the mechanism of reserve accumulation under rollover risk.
  • Shows that reserves are only beneficial when there is a risk of sudden stops and long-duration debt.

• A. Environment

  • The economy lasts for three periods.
  • The government receives endowments and faces a sudden-stop shock.
  • The government can issue long-duration bonds and accumulate reserves.

• B. Results

  • Derives Proposition 1, which states that reserves are accumulated only when the expected marginal benefit of using them exceeds the expected marginal cost.
  • Shows that perfect consumption smoothing is possible when rollover risk is zero and reserve returns equal borrowing costs.

• III. Model

  • Describes a dynamic small-open-economy model.
  • The government's value function and decision rules are defined under Markov Perfect Equilibrium.
  • The bond price is determined by risk-neutral foreign investors and equilibrium conditions.

• IV. Calibration

  • The model is calibrated using Mexico as a reference.
  • Matches debt levels, sovereign spreads, spread volatility, and frequency of sudden stops.

• V. Quantitative Results

  • Simulations show that reserves are held even when they yield lower returns.
  • The procyclical nature of capital flows is captured by the countercyclical default premium.
  • Long-duration bonds are essential for hedging rollover risk.
  • Sudden stops lead to reduced borrowing and increased reserve usage.
  • The model can account for the entire reserve holdings in Mexico when reserves reduce the probability of sudden stops.

Conclusion

• The paper provides a quantitative framework to understand the joint accumulation of reserves and debt in emerging economies.
• Rollover risk and long-duration bonds are central to the optimal reserve policy.
• The precautionary role of reserves is emphasized, as they help manage financial turbulence and smooth consumption during sudden stops.
• The model is consistent with empirical evidence, including the procyclical nature of capital flows and the role of reserves in crisis prevention.