Reserve Management in Emerging Market Economies: Trends and Challenges
11 Pages Posted: 13 Dec 2019
Date Written: October 31, 2019
Foreign exchange (FX) reserves are an integral part of emerging market (EME) central banks’ policy toolkit. They insure against shocks and complement monetary policy to achieve price and financial stability. But building and holding FX reserves is costly. Drawing on a recent survey of 21 EME central banks and their contributions published in this volume, this paper highlights that most have gradually broadened the range of assets and currencies in their reserve portfolios, to diversify and to raise their portfolios’ return. Exposure to credit risk remains very low, and risk-sharing arrangements with the Treasury reduce some central banks’ exposure to market and exchange rate risk. While the US dollar dominates most portfolios, the currency composition also shows strong regional patterns.
Full Publication: Reserve Management and FX Intervention
Keywords: Foreign exchange reserves, central bank balance sheets, emerging market economies
JEL Classification: F31, E58, G11
Suggested Citation: Suggested Citation