Current Issues in Economics and Finance
Do Industrialized Countries Hold the Right Foreign Exchange Reserves?
Volume 19, Number 1    2013
JEL classification: F30, F40

Authors: Linda Goldberg, Cindy E. Hull, and Sarah Stein

That central banks should hold foreign currency reserves is a key tenet of the post-Bretton Woods international financial order. But recent growth in the reserve balances of industrialized countries raises questions about what level and composition of reserves are “right” for these countries. A look at the rationale for reserves and the reserve practices of select countries suggests that large balances may not be needed to maintain an effective exchange rate policy over the medium and long term. Moreover, countries may incur an opportunity cost by holding funds in currency and asset portfolios that, while highly liquid, produce relatively low rates of return.

Available only in PDF pdf 10 pages / 285 kb
Press Release
By continuing to use our site, you agree to our Terms of Use and Privacy Statement. You can learn more about how we use cookies by reviewing our Privacy Statement.   Close