01795cas a2200253 a 4500 AALejournalIMF016763 230101c9999 xx r poo 0 0eng d 5.00 USD 9781484325445 1018-5941 BD-DhAAL BD-DhAAL Jeanne, Olivier. Optimal Reserves in Financially Closed Economies / Olivier Jeanne, Damiano Sandri. Washington, D.C. : International Monetary Fund, 2016. 1 online resource (29 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 Financially closed economies insure themselves against current-account shocks using international reserves. We characterize the optimal management of reserves using an open-economy model of precautionary savings and emphasize several results. First, the welfare-based opportunity cost of reserves differs from the measures often used by practitioners. Second, under plausible calibrations the model is consistent with the rule of thumb that reserves should be close to three months of imports. Third, simple linear rules can capture most of the welfare gains from optimal reserve management. Fourth, policymakers should place more emphasis on how to use reserves in response to shocks than on the reserve target itself. Mode of access: Internet Sandri, Damiano. IMF Working Papers; Working Paper ; No. 2016/092 Full text available on IMF http://elibrary.imf.org/view/journals/001/2016/092/001.2016.issue-092-en.xml IMF e-Library