The Currency Composition of Foreign Exchange Reserves: Retrospect and Prospect
July 1, 2000
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Summary
This paper examines the determinants of the currency composition of international reserves. Our single most important finding is the striking stability over time of the relationship between the demand for reserves denominated in different currencies and its principal determinants: trade flows, financial flows and currency pegs. This result contrasts sharply with recent predictions of sharp shifts in the currency composition of central banks’ holdings of foreign exchange. The message would seem to be that in this, as in other respects, the international monetary system is in a mode of gradual, continuous evolution, not of rapid, discontinuous change.
Subject: Banking, Central banks, Currencies, Financial markets, International capital markets, International monetary system, International reserves, Money, Reserve currencies
Keywords: break, composition change, composition of reserve, Currencies, currency, currency composition, currency peg, currency share, dollar peg, EMU currency holding, Global, International capital markets, International monetary system, International reserves, reserve, Reserve currencies, unspecified currency, WP
Pages:
34
Volume:
2000
DOI:
Issue:
131
Series:
Working Paper No. 2000/131
Stock No:
WPIEA1312000
ISBN:
9781451855272
ISSN:
1018-5941
