Azerbaijan's currency reserves will significantly increase by year-end". One attempt  uses a standard model of open economy intertemporal consumption to show that it is possible to replicate a tariff on imports or a subsidy on exports by closing the current account and accumulating reserves. Republic of the Congo. Generally, every country tries to accumulate enough of forex reserves to maintain a certain number of months' import cover.
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Drag according to your convenience. There is always a risk of capital flows reversing quickly during adverse global events, which needs an emerging economy like India to have enough reserves to match the demand. It is surprising to hear from the US Treasury that the strengthening Indian economic metrics, currently facing a three year low quarterly growth, could hurt it.
This would result in a much slower pace of reserve accumulation in the coming months. During the period, the rupee has gained 3. The US motive is to protect American workers and companies from unfair outside competition and to prevent its major trading partners from deliberately keeping currency undervalued to gain competitive advantage in exports. This puts the country in a vulnerable position in terms of global financial volatility as it happened in when the US Federal Reserve chairman gave the first hint of rolling back the record monetary easing programme.
The deficit is funded by capital flows in the form of foreign direct investment and foreign portfolio investments. So, reserves should be seen as a macro prudential tool. The IMF External Sector Report said that 11 advanced economies had current account surpluses in , and one-third of them have excessive surpluses creating global imbalances in trade and consumption.
The IMF identified that real effective exchange rates in these countries with surpluses were generally undervalued. While export-dominated economies such as China and Japan have often used currency as a tool to retain competitive advantage in global trade, India uses it more to temper the volatility in the currency markets and to keep its monetary policy effective.
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