Optimal Level Of Reserves Research Articles

Optimal reserve determination in the presence of A-CAES and wind, considering a stochastic approach for EVs and driver's responsibility

Determination of the optimal reserve requirement of clean energy systems is one of the main challenges of system scheduling. Electric vehicles (EVs) could reduce public transportation emission due to fossil fuels in the cities, although power systems confront uncertainties in the presence of EVs. Adiabatic compressed air energy storage (A-CAES) also has merits like no fossil fuel consumption, low costs, and fast start-up. It could provide various applications like energy and reserve to reduce power system costs. This paper presents a probabilistic method for optimal determining of spinning reserve in the presence of wind, A-CAES, and EVs for the day-ahead market. The optimal reserve level will determine via simultaneously optimizing the total operation cost and total expected energy not supplied. For the A-CAES facility, we consider air pressure limitations, thermal storage capacity limitations, and power output limitations. Besides, the availability, responsibility, driving patterns, and the variety of electric vehicles are also considered. The impact of incentive on system cost is analyzed either. Dc power flow is used to model the transmission flow limits. The problem is formulated as mixed-integer linear programming. Finally, the well-known 24 bus test system is used to verify the efficiency of the proposed model. At the end we found A-CAES is not suitable for participation in the reserve market and it’s better to use them for peak shaving. Most of EVs will participate in reserve market and 30 percent of incentive cost will cause the optimal cost of the system.

Clinical Findings in Healthy Dogs Fed With Diets Characterized by Different Carbohydrates Sources.

In recent years, pet owners have become more interested in the ingredients, and quality of pet-food, and several studies have demonstrated that feed management could affect healthy status. Recently, some authors indicated that commercial diets formulated without cereals, or using unconventional protein, and starch sources, can cause a reduction in taurine levels in both whole blood, and plasma. Nevertheless, the specific mechanism by means of which nutritional factors determine this reduction is not completely clear. Thirty neutered half-breed dogs were recruited at a kennel in the province of Naples (Italy) to investigate the influence of carbohydrates sources, and dietary density of nutrients on healthy status of dogs in terms of blood count, and biochemical parameters. The dogs were housed in the kennel and divided into three distinct groups. Three iso-energy, and iso-nitrogen commercial kibble diets (named GF1, GF2, and CB) with different protein, and carbohydrates contents, and carbohydrates sources were chosen for the trial. The chemical composition and amino acid profile of each of the three tested diets were analyzed. Moreover, blood samples of each dog were collected to evaluate the hematological and biochemical profiles. The taurine level was determined both on plasma and whole blood. The effect of the diets was analyzed statistically, and all tested diets were compared to the control one. There were significant differences between the three tested diets as regards their chemical composition. The concentrations of all amino acids seem to reflect protein content diets. The hematological profile resulted within the ranges considered physiological for the canine species for all subjects. Compared to the control diet, the three tested diets showed significant differences in blood count for MCHC and platelets. The biochemical profile showed significant differences between the diets, particularly their AST, fructosamine, lipase, and triglycerides values. The diets did not affect the blood and plasma taurine levels. They resulted in higher than optimal reserve levels. Preliminary results showed that the sources of carbohydrates and use of balanced diets affected only some biochemical parameters and did not alter the levels of taurine in healthy adult dogs.

New Indicators Developed for Assessing Optimal Reserve Level in Emerging Market Economies: An Empirical Analysis for Turkey

2008-09 Küresel Finansal Krizi ile birlikte, rezervlerin yeterliliğinin tespit edilmesi amacıyla kullanılan geleneksel yöntemlerin kısmen yetersiz kalması ve genellikle birbiriyle çelişen sinyaller vermesi, özellikle gelişmekte olan ülkeler ve düşük gelir düzeyine sahip ülkeler için, ülkelere özgü dinamiklerin göz önünde bulundurularak, geleneksel yöntemlerde odaklanılan riskleri çok yönlü ele alan yeni bir metriğin geliştirilmesi ihtiyacını doğurmuştur. Bu çalışmanın amacı, Türkiye için, Uluslararası Para Fonu (IMF) tarafından, rezerv yeterliliğinin tespit edilmesine yönelik geliştirilen yeni metriğin kullanılarak, rezervlerin yeterliliğinin araştırılmasıdır. Çalışma dönemi, 2005:Ç42019:Ç4 dönemi verilerini kapsamaktadır. Analizde, Im vd. (2014) tarafından geliştirilen, RALS (Residual Augmented Least Squares) ADF birimkök testi kullanılmaktadır. Analiz sonuçları, Türkiye’de, söz konusu dönemde rezervlerin yeterli olduğunu; diğer yandan istikrarlı bir trende sahip olmadığını göstermektedir.

Hedging “Sudden Stops” and Emergent Recessions through International Reserves in Egypt—An Application of the Martingale Optimality Principle Approach

This paper addresses the role of international reserves in mitigating the adverse effects of potential “sudden stops” on economic growth. As holding of reserves implies a cost in terms of domestic consumption, we calculate the optimal level of reserves that helps hedge against such eventuality. Treating it as an optimization problem, we employ the Martingale Optimality Principle to estimate the optimal values of reserves and consumption. For Egypt, we find that optimal consumption is trending upward when the optimal level of reserves is trending downward. Using stochastic control, we obtain another approximate or suboptimal set of values for both variables. These values closely mimic Egypt’s observed reserve and consumption measurements. Our findings indicate that Egypt’s actual reserves during 1985-2017 exceed estimated optimal levels of reserves, even under a highly risk averse scenario, and point out to the implied consumption costs.

Optimal Reserve Determination Considering Demand Response in the Presence of High Wind Penetration and Energy Storage Systems

Qualification of the reserve requirement of power systems in the presence of load uncertainties and renewable energy resources is one of the most important challenges of system operators. Especially, existence of wind turbines with unavoidable volatility in their generated powers makes this problem more serious. In this paper, is proposed a probabilistic method for optimal determining of the spinning and non-spinning reserves. In this method, the required optimal reserve level would be determined via simultaneously optimizing the operation cost (OC) and the expected energy not supplied (EENS) cost under security constraint unit commitment. That is, OC includes the cost of both reserve market and energy markets and EENS is computed using a piecewise linear function. The demand response program is considered to provide the reserve service from the demand side. These improve the power system reliability and also reduce the OC. Besides, energy storage systems have been included as a promising approach to diminish the uncertainties of wind power and electrical load. The method is formulated in a two-stage stochastic programming framework, where the first stage represents the day-ahead market, and the second stage deals with the real-time market. Also, a multi-step algorithm has been presented to implement the proposed model. Finally, the well-known 3-buses and 24-buses test systems would be used to verify the efficiency of proposed model.

Sudden stops, limited enforcement, and optimal reserves

Using a limited-enforcement model in which a sovereign government decides jointly on external debt and foreign reserves, we quantitatively determine the optimal levels of reserves and external debt. When reserves are effective in reducing the probability of a sudden stop, the model can generate the reserves-to-debt ratio observed recently in developing countries. The optimal level of reserves is increasing in the country's fundamental vulnerability to sudden stops, the effectiveness of reserves in reducing the probability of a sudden stop, the output costs of crises, and risk aversion.

Balance of Payments Sustainability and Optimal International Reserves

In this paper we explore the consequences of bailout packages for the long run international reserves policy in emerging market economies. We develop a model that looks at the intertemporal optimization problem of a small open economy that accumulates international reserves at a cost to insure itself against the risk of a balance of payments crisis associated with a fall in output. The analysis is applied to the Mexican case. Without the possibility of bailout, the model predicts an optimal reserves policy considerably higher than the current long run international reserves policy. When the model accounts for the bailout package that Mexico received after its 1994 Tequila crisis and the possibility of similar rescue packages in the future, the current reserves policy is in the range of the model’s predictions. A key feature of the model is that it explicitly links the optimal level of reserves not only to local policy rules, such as the trade policy and the net liability position, but also to the notion of sustainable BOP, which is, in turn, linked to global factors such as U.S. interest rates and oil prices.

Insuring against Neighboring Crises : International Reserves in Latin America

This paper revisits the traditional literature on optimal demand for international reserves by exploring the possibility that perceived contagion risk originating from neighboring countries influences a country’s own demand for reserves. In addition, it highlights another reason why the mechanisms of local coordination and support within the framework of regional integration might be desirable additions to the current international financial structure. Using a sample of the seven largest Latin American economies, the empirical evidence presented here suggests that countries take into consideration the volatility conditions of their neighbors when determining their own optimal level of reserves. Moreover, given that countries in Latin America appear to purchase insurance against contagion risk, this paper argues that a mechanism of reserve pooling that increases the protection of all members of the pool might reduce the risk of contagion and thereby also reduce the opportunity cost faced by individual countries.

Reserve accumulation and financial crises: From individual protection to systemic risk

This paper provides a new perspective on the relationship between countries׳ international reserve holdings and financial crises: while the “local” view holds that reserves may prevent domestic crises, it overlooks that the accumulation of reserves relaxes the financing constraint of the reserve currency country and may cause a financial crisis in the centre, which is transmitted globally. According to this “global” view reserve accumulation might destabilize the international financial system. Since the crisis affects all countries alike, the accumulation of reserves imposes a negative externality on non-accumulating countries.We integrate this idea in a theoretical model of the optimal amount of reserves and illustrate the gap between local and global optimality: the consideration of systemic risk lowers the demand for reserves. Moreover, if a supranational authority determines the optimal level of reserves, it internalizes the negative externality and accumulates fewer reserves. A macroprudential tax on reserve hoardings might implement the socially optimal solution. Our calibration analysis shows that these considerations are economically significant: they lower the optimal amount of reserves in the benchmark case by 45%.

The Optimal Level of International Reserves for Emerging Market Countries: A New Formula and Some Applications

We present a model of the optimal level of international reserves for a small open economy seeking insurance against sudden stops in capital flows. We derive a formula for the optimal level of reserves and show that plausible calibrations can explain reserves of the order of magnitude observed in many emerging market countries. The buildup of reserves in emerging market Asia can be explained only if one assumes a large anticipated output cost of sudden stops and a high level of risk aversion.

Optimal Precautionary Reserves for Low-Income Countries: A Cost-Benefit Analysis

This paper develops a cost-benefit approach that helps to quantify the optimal level of international reserves in low-income countries, focusing on the role of reserves in preventing and mitigating absorption drops triggered by large external shocks. The approach is applied to a sample of 49 LICs over the period 1980-2008 to yield estimates of the likelihood and severity of a crisis. The calibration results suggest that the standard metric of three months of imports is inadequate for countries with fixed exchange rate regimes. The results also highlight the role of overall policy frameworks and availability of Fund-support in determining optimal reserve levels, raising questions about the uniform applicability of standard rules of thumb across countries.

Optimal Precautionary Reserves for Low-Income Countries: A Cost-Benefit Analysis

This paper develops a cost-benefit approach that helps to quantify the optimal level of international reserves in low-income countries, focusing on the role of reserves in preventing and mitigating absorption drops triggered by large external shocks. The approach is applied to a sample of 49 LICs over the period 1980-2008 to yield estimates of the likelihood and severity of a crisis. The calibration results suggest that the standard metric of three months of imports is inadequate for countries with fixed exchange rate regimes. The results also highlight the role of overall policy frameworks and availability of Fund-support in determining optimal reserve levels, raising questions about the uniform applicability of standard rules of thumb across countries.

Optimisation of warranty reserve policies

Companies typically plan for warranty costs through creation of a reserve fund. Most researchers assume that the warranty reserve is set based on the expected total warranty costs. However, companies rarely keep reserves to cover their liabilities for the whole life of their products, since maintaining excess reserves would cause opportunity cost. We propose an optimal policy rule based on the amount of cash additions/subtractions at the beginning of each period and the amount to contribute to the reserve after each sale. We model the warranty reserve problem as a single period inventory problem. We have shown that when there is no contribution after each sale the optimal policy resembles a ‘base-stock’ policy. When contribution after each sale is permissible, the optimal reserve level decreases as warranty costs can be covered by accruals. However, this kind of ‘pay-as-you-go’ system also increases the uncertainty in net flows from the fund.

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The Optimal Level of Reserves for Low-Income Countries: Self-Insurance against External Shocks

This paper develops an analytical framework that helps to quantify the optimal level of international reserves for a small open economy with limited access to foreign capital and subject to natural disasters or terms-of-trade shocks. International reserves allow the country to relieve balance of payments pressures caused by external shocks and to avoid large fluctuations in imports. The paper calibrates the model to two regions—the Caribbean and the Sahel region in sub-Saharan Africa—and assesses the sensitivity of the results. The conclusion is that popular rules of thumb, such as maintaining reserves equivalent to three months of imports, only give imprecise benchmarks.

Foreign Reserve Adequacy in Sub-Saharan Africa

This paper looks at the question of adequacy of reserves in sub-Saharan African countries in light of the shocks faced by these countries. Literature on optimal reserves so far has not paid attention to the particular shocks facing low-income countries. We use a two-good endowment economy model facing terms of trade and aid shocks to derive the optimal level of reserves by comparing the cost of holding reserves with their benefits as an insurance against a shock. We find that the optimal level of reserves depends upon the size of these shocks, their probability, and the output cost associated with them.

International Reserve Trends in the South Caucasus and Central Asia Region

In recent years, the South Caucasus and Central Asia countries (CCA-6) have received significant foreign exchange inflows. While a healthy reserve buffer is desirable to selfinsure against external crises, holding international reserves also involves costs. We analyze the adequacy of CCA-6 reserves using widely recognized rules of thumb, and simulate optimal reserve levels applying the Jeanne (2007) model. Both the adequacy measures and the model-based simulations indicate that, with the exception of Tajikistan, CCA-6 reserves had increased to broadly comfortable levels by 2006. More recently, reserve adequacy has been tested in Kazakhstan, which has been affected by the 2007 global liquidity crunch.

International Reserves in Emerging Market Countries: Too Much of a Good Thing?

International Reserves in Emerging Market Countries:Too Much of a Good Thing? Olivier Jeanne With International reserves four times as large, in terms of their GDP, as in the early 1990s, emerging market countries seem more protected than ever against shocks to their current and capital accounts. Some have argued that this buildup in reserves might be warranted as insurance against the increased volatility of capital flows associated with financial globalization.1 Others view this development as the unintended consequence of large current account surpluses and suggest that the level of international reserves has become excessive in many of these countries.2 [End Page 1] Do emerging market countries hold too much international reserves, and are there better ways to use those funds? Answering these questions requires a normative benchmark for the optimal level of reserves. I present in this paper a simple welfare-based model of the optimal level of reserves to deal with the risk of capital account crises or of "sudden stops" in capital flows. On the basis of this model, I derive some formulas for the optimal level of reserves and compare them with conventional rules of thumb, such as the Greenspan-Guidotti rule of full coverage of short-term debt. I then calibrate the model for emerging market countries and compare its predictions with the actual data. One lesson from this exercise is that the optimal level of reserves is subject to considerable uncertainty, because it is sensitive to certain parameters that are difficult to measure. The model nevertheless produces ranges of plausible estimates against which the data can be compared. I find that it is not difficult for the model to explain a reserves-GDP ratio on the order of 10 percent for the typical emerging market country (close to the long-run historical average), and that even higher ratios can be justified if one assumes that reserves have a significant role in crisis prevention. The levels of reserves observed in many countries in the recent period, in particular in Latin America, are within the range of the model's predictions. Ultimately, however, the insurance model fails to account for the recent pattern of reserves accumulation in emerging market countries. The reason is that most of the reserves accumulation has taken place in Asian emerging market countries, where the risk of a capital account crisis seems much too small to justify such levels of self-insurance. The insurance model can account for the reserves accumulation observed in the Asian emerging market countries only if one assumes that the expected cost of a capital account crisis is unrealistically large (more than 60 percent of GDP for one of the two major types of crisis examined). The conclusion that most of the current buildup of reserves is not justified by precautionary reasons has some implications for reserves management. There is little reason for countries to invest these funds in the liquid but low-yielding foreign assets in which central banks tend to invest. Rather, reserves should be viewed as a component of domestic external wealth that is managed by the public sector on behalf of the domestic citizenry, taking full advantage of the portfolio diversification opportunities available abroad. Indeed, an increasing number of emerging market countries [End Page 2] are transferring a fraction of their reserves to "sovereign wealth funds," mandated to invest in a more diversified way and at a longer horizon than central banks normally do. This is a trend that might take on considerable importance looking forward. The last part of the paper discusses some policy challenges and opportunities implied by the buildup in emerging market countries' "sovereign wealth." I discuss, first, the impact of sovereign wealth diversification on global financial markets, and second, some ways in which this wealth could be used in collective international arrangements—to insure against future crises or to promote financial development. The Buildup in International Reserves The growth in the international reserves of emerging market countries is striking when compared with the contemporaneous trends in reserves in industrial countries (figure 1).3 Whereas reserves in a group of industrial countries have remained stable below 5 percent of GDP, reserves in the emerging market countries have grown more...

The Optimal Level of Foreign Reserves in Financially Dollarized Economies: The Case of Uruguay

This paper extends the framework derived by Jeanne and Ranciere (2006) by explicitly incorporating the dollarization of bank deposits into the analysis of the optimal level of foreign reserves for prudential purposes. In the extended model, a sudden stop in capital flows occurs in tandem with a run on dollar deposits. Reserves can smooth consumption in a crisis but are costly to carry. The resulting expression for the optimal level of reserves is calibrated for Uruguay, a country with high dollarization of bank deposits. The baseline calibration indicates that the gap between actual and optimal reserves has declined sharply since the 2002 crisis due to a substantial reduction in vulnerabilities. While the results suggest that reserves are now near optimal levels, further accumulation may be desirable going forward, partly because banks' currently high liquidity levels are likely to decline as the credit recovery matures.

Jordan's International Reserve Position: Justifiably Strong

Jordan has seen a large increase in its international reserve holdings in recent years. While a healthy reserve buffer is needed under a fixed exchange rate regime, determining optimal reserve levels is not straightforward. In this paper, we first use several traditional measures of reserves adequacy to compare Jordan's reserve holdings with other emerging market (EM) countries. Subsequently, we analyze Jordan's reserve holdings using a reserves-optimizing model, based on Jeanne and Ranciere (2006) (J-R), but extended to allow reserve holdings to influence the likelihood of a sudden stop. The overall analysis suggests that Jordan's reserve holdings provide sufficient support to sustain the dinar peg and to deal with the most extreme capital account disruptions.