When firms and financial intermediaries are credit constrained any change in their relative wealth will affect interest rates and aggregate investment. Also, when hit by a shock such as a credit crunch, capital constrained firms will be the ones affected the most.

Holmstrom & Tirole (1997) Quarterly Journal of Economics


While it is rational for a country to accumulate foreign reserves as insurance against domestic crises, the worldwide accumulation of foreign reserves might also increase the risk of a financial crises at the centre.

Steiner, A. (2014) European Economic Review