Forthcoming, Open Economies Review

In this paper, we study the determinants of cross-country variation in the level of international reserves over 1981-95. ConÞrming intuition, trade openness is easily the most important variable. There is also some evidence that Þnancial deepening is associated with an increase in the reserves ratio. Smaller and more volatile industrial countries hold larger reserves than their larger, less volatile counterparts. In addition, more indebted developing countries tend to have smaller reserve ratios. We view these results as establishing some interesting stylized facts that may be helpful in informing future theoretical modelling of reserves behavior