01876cas a2200265 a 4500 AALejournalIMF013346 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475571295 1018-5941 BD-DhAAL BD-DhAAL Bianchi, Javier. International Reserves and Rollover Risk / Javier Bianchi, Juan Carlos Hatchondo, Leonardo Martinez. Washington, D.C. : International Monetary Fund, 2013. 1 online resource (40 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Two striking facts about international capital flows in emerging economies motivate this paper: (1) Governments hold large amounts of international reserves, for which they obtain a return lower than their borrowing cost. (2) Purchases of domestic assets by nonresidents and purchases of foreign assets by residents are both procyclical and collapse during crises. We propose a dynamic model of endogenous default that can account for these facts. The government faces a trade-off between the benefits of keeping reserves as a buffer against rollover risk and the cost of having larger gross debt positions. Long-duration bonds, the countercyclical default premium, and sudden stops are important for the quantitative success of the model. Mode of access: Internet Hatchondo, Juan Carlos. Martinez, Leonardo. IMF Working Papers; Working Paper ; No. 2013/033 Full text available on IMF http://elibrary.imf.org/view/journals/001/2013/033/001.2013.issue-033-en.xml IMF e-Library