engleski

THE APPROPRIATENESS OF INTERNATIONAL RESERVES IN CEE COUNTRIES AND THEIR ROLE DURING FINANCIAL CRISES

International reserves play an important role for every central bank. They are important as a store of value and as a factor for conducting the monetary policy of a country. The importance of reserves is further emphasized as they role in estimating a country’s macroeconomic stability is threefold. Firstly, they show the ability of a country in ensuring its international liquidity. Secondly, they are important in safeguarding country’s credibility in international environment and thirdly, in enabling easier access to international capital market. This means that for central banks it is important to have an adequate level so they could intervene in the best possible way in the case of problems (for instance, exchange rate movements), shocks – external shocks - problems with foreign currency liquidity, or just to keep the country’s credibility considering international debt. To have an adequate level means to be ready for such situations. Among rules, which say what the appropriate level of reserves should be, two are distinguishing. First says that the reserves should be above the level of country’s three months import and second that they should cover one year country’s international debt – principal and interest. This paper reviews present literature on level of international reserves and scrutinize it’s appropriateness in distinguishing CEE countries, analyzing their movements and reasons for those movements and evaluating their usage during current financial crises. Therefore the aim of the working paper is to stress out the significance of international reserves and their role during financial crises.

international reserves; financial crisis; CEE countries

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