Central banks in much of the developing world are awash with foreign exchange reserves. At present, these reserves are mostly invested in short-term US Treasury bills with very low expected rates of return. It is time they were put to better use.

As Lawrence Summers, the former US Treasury Secretary and outgoing president of Harvard, argued in a recent speech, the level of reserves in many countries far exceeds traditional measures of what is required to guard against a foreign exchange crisis. One common benchmark is that reserves should be equal to one times short-term foreign currency debt due within a year. Applying a more conservative two times short-term debt, central banks in developing countries are holding $1,500bn in excess reserves.