Optimal level of reserve holdings: An empirical investigation in the case of Albania
Author: Gerti Shijaku
Printed on: 08.08.2012
Production date: 08.08.2012
Material category : Not Periodic Publications / Working Papers
This discussion material analyses the change in international reserve
holdings and their determinants, and evaluates their optimal level from
a cost opportunity perspective. The material is based on the Buffer
Stock model. This model assumes that reserve holdings are affected
by changes of payments and receipts in the balance of payments.
Reserves serve as a buffer stock to accommodate fluctuations of
external transactions.