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Author/Editor:
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Lim, Ewe-Ghee
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Publication Date:
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December 01, 2007
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Electronic Access:
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Free Full text
(PDF file size is 287KB).
Use the free
Adobe Acrobat Reader
to view this PDF file
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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Summary:
This paper tests whether reserve portfolios respond to exchange rate changes with a portfolio rebalancing strategy, which requires the purchase of depreciating currencies and sale of appreciating ones. The paper finds empirical support for the strategy, in particular that dollar depreciation/appreciation results in rebalancing switches vis-a-vis the other major reserve currency, the euro; valuation changes in the minor currencies tend to result in switches among themselves. The finding implies that currency diversifications in response to exchange rate changes have thus far tended to be stabilizing for exchange markets; it also helps explain the relative stability of reserve currency shares.
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Series:
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Working Paper No. 07/293
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Subject(s):
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Exchange rates | Reserves | euro | U.S. dollar | Exchange markets
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Author's Keyword(s):
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Reserves | portfolio rebalancing | Dollars | Euros | COFER |
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English
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Publication Date:
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December 01, 2007
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Format:
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Paper
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Stock No:
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WPIEA2007293
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Pages:
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22
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Price:
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US$18.00 )
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Please address any questions about this title to
publications@imf.org
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