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International Reserve Management under Rollover Crises

Working Paper 805 | Published April 17, 2024

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Mauricio Barbosa-Alves Research Analyst
Javier Bianchi Monetary Advisor
César Sosa-Padilla University of Notre Dame
International Reserve Management under Rollover Crises


This paper investigates how a government should manage international reserves when it faces the risk of a rollover crisis. We ask, should the government accumulate reserves or reduce debt to make itself less vulnerable? We show that the optimal policy entails initially reducing debt, followed by a subsequent increase in both debt and reserves as the government approaches a safe zone. Furthermore, we uncover that issuing additional debt to accumulate reserves can lead to a reduction in sovereign spreads.