Description

This paper analyzes the recent evolution and the actual level of international reserves in Chile using complementary approaches. First, we compare the current level of international reserves of Chile with other countries, using as controls a set of indicators that are traditionally used in the literature. Then, we compare the current level of international reserves with the estimation from panel regressions and with the level suggested by theoretical models of optimal demand of reserves. The exercises show that, during the period of floating exchange rate the level of reserves in Chile has been adequate for reasonable levels of risk suggested by theoretical models. However, by the end of this period, its level is below the levels observed in other emerging countries with floating exchange rate regimes.