Central Bank Reserve Management and International Financial Stability—Some Post-Crisis Reflections
IMF Working Papers, February 16, 2018
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Bibliographic details
- Authors: Bradley Jones
- Published: February 16, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484342008.001
Main findings
- Motivated by the tension first revealed during the global financial crisis between the domestic and international financial stability obligations of central bank reserve managers, this paper offers some reflections along four main lines.
- First: official reserve management has evolved to mirror important aspects of private institutional investor behavior over time, and the paper addresses the policy relevance of this convergence.
- Second: evidence is documented of procyclical portfolio behavior by reserve managers during the crisis, which added to the stabilization burden shouldered by central banks in reserve currency-issuing countries.
- Third: in appraising the evolution of related vulnerabilities since the crisis, the paper finds grounds for both cautious optimism and lingering concern, the balance of which points to an uncertain future resolution.
- Fourth: some potential remedies are presented to help dampen the procyclical impulses of reserve managers in future periods of international financial turbulence.
Evidence and analysis
- Demonstrates convergence between official reserve management practices and private institutional investor behavior over time.
- Documents procyclical portfolio behavior by reserve managers during the global financial crisis of 2008-2009.
- Highlights that procyclical reserve manager behavior increased the stabilization burden on central banks in reserve currency-issuing countries.
Appraisal of post-crisis vulnerabilities
- Finds grounds for both cautious optimism and lingering concern regarding the evolution of vulnerabilities since the crisis.
- Concludes that the balance between improvements and remaining risks points to an uncertain future resolution.
Policy recommendations and remedies
- Proposes potential remedies aimed at damping the procyclical impulses of reserve managers in future periods of international financial turbulence.
- Emphasizes the policy relevance of the convergence between official reserve management and private institutional investor behavior when designing remedies.
Key statistics and identifiers
- Author: Bradley Jones
- Date: February 16, 2018
- Pages: 30
- Volume: 2018
- Issue: 031
- Series: Working Paper No. 2018/031
- DOI: https://doi.org/10.5089/9781484342008.001
- Stock No: WPIEA2018031
- ISBN: 9781484342008
- ISSN: 1018-5941
- Subjects: Banking; Central banks; Financial crises; Financial institutions; Global financial crisis of 2008-2009; International reserves; Reserve assets; Reserves management; Securities
- Keywords: a number of central banks; asset; asset owner; central bank; central bank exposure; Central bank reserve management; financial stability; Global; Global financial crisis of 2008-2009; International reserves; liquidity needs; market surveillance activity; Reserve assets; reserve currency; reserve manager; Reserves management; risk assets; risk management.; securities; swap line; WP
Bradley Jones. "Central Bank Reserve Management and International Financial Stability—Some Post-Crisis Reflections", IMF Working Papers 2018, 031 (2018), February 16, 2018, DOI: https://doi.org/10.5089/9781484342008.001.