Finally, given the overall impact of increases in both forex reserves and external debt, it is possible to visualize circumstances when such operations are optimal. Fourth, are there alternatives to managing liquidity through maintaining reserves? In this regard, further explorations on the concept of “national liquidity” articulated in BIS Policy Papers No. 8, September 2000 appear to be useful.
Recent crises have shown that countries can be faced with liquidity problems not only because of the foreign assets and liabilities of the government and central bank, but also because of the foreign currency liabilities of the banks and even the corporate sector.