Our recent research, written with Rashad Ahmed, Joshua Aizenman, and Gazi Salah Uddin, on the mitigating effect of foreign exchange reserves during the 2021-22 U.S. monetary tightening cycle, has been cited in the printed weekly edition of The Economist.
In the Finance and economics section, they recall that “big reserve accumulators may, in fact, have reason to rebuild. Countries that entered 2021 with larger reserves and greater credibility in their capacity to intervene saw smaller depreciations in their currencies, all else equal. The authors calculate that additional reserves worth ten percentage points of national GDP were associated with 1.5% to 2% less depreciation in the domestic currency, relative to the dollar. Meanwhile, a number of countries which began this period with modest reserves have suffered deep depreciations.”
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