In my first Vox EU column, written with Joshua Aizenman, Sy-Hoa Ho, Luu Duc Toan Huynh and Gazi Salah Uddin, you will learn about some stabilizing properties of international reserves after terms-of-trade shocks:
The primary objective of this column is to gain insights into the implications of maintaining international reserves in open economies. Our findings, particularly during the 2000s and 2010s, indicate that increased international financial integration did not lead to a reduction in the accumulation of reserves. Instead, it appears that international reserves serve as a substitute for the presence of robust financial institutions. Consequently, an alternative policy approach could involve focusing on the development of sound financial institutions as a means to reduce the reliance on accumulating international reserves (Folkerts-Landau et al. 2022).
You can find the NBER version, the abstract, the keywords and the online appendix in an older post: