2023 · Q67
Adequacy of foreign exchange reserves of a country is captured by which of the following indicators?
- 1Reserves to import ratio
- 2Reserves to external debt ratio
- 3Reserves to GDP ratio
- 4Reserves to monetary aggregates
Select the correct answer using the code below:
indian-polity-economyfiscal-external
- A1 and 3 only
- B1, 2, 3 and 4
- C2, 3 and 4 only
- D1, 2 and 4 only
Explanation
The conventional indicators of foreign-exchange-reserve adequacy are the reserves-to-import ratio (import cover in months), the reserves-to-short-term-external-debt ratio (the Greenspan-Guidotti rule), and the ratio of reserves to monetary aggregates. The reserves-to-GDP ratio is not a standard adequacy metric. Hence statements 1, 2 and 4 only.