Managing Capital Flows and Exchange Rates
KDI/EWC series on Economic Policy
Edited by Dongsoo Kang and Andrew Mason
Chapter 7: International reserves for emerging economies
The coffer of international reserves is the most realistic way out for emerging economies to alleviate exchange rate instability problems and thus to prevent a currency crisis. Like most economic issues, however, a huge accumulation of international reserves also has a Möbius strip–like nature—that is, both defending and depreciating the domestic currency depending on the circumstances (Lee, 2016). Given the crucial role of international reserves and their contradictory aspects, we need to take a look at international reserves from various angles.
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