Can governments sleep more soundly when holding international reserves? A banking and financial vulnerabilities perspective*

We use a sample of 40 developing and emerging countries over the period 1995–2015 to assess effectiveness international reserve holding as crisis mitigator. test relevance accumulation decreasing returns assumption by estimating most recent version PSTR model. find that increasing stocks reserves allows domestic authorities mitigate negative impacts financial banking vulnerabilities on GDP growth rates leading reject assumption. This evidence is robust sensitivity checks.