Abstract
As we have already mentioned above (Sect. 22.4), international liquidity and international reserves are often used as synonyms, although they are not. International reserves are financial assets representing liquid international purchasing power in the hands of the monetary authorities. International liquidity is a broader concept and also includes access to loans as well as the monetary authorities’ ability to convert illiquid assets into liquid purchasing power through international asset markets. A further distinction is made between “owned” and “borrowed” reserves. The former, unlike the latter, have no offsetting foreign liability of the monetary authorities. There is a last distinction to be recalled: that between official and private international liquidity. The former only includes liquid international assets held by the monetary authorities, while the latter includes all the foreign liquid assets held by residents of the country.
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