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Lunch Seminar: César Sosa-Padilla - University of Notre Dame
Wednesday 14 May 2025, 01:00pm - 02:00pm

International Reserve Management under Rollover Crises

Abstract:

This paper 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.

   
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