Currency composition of foreign exchange reserves

Hiro Ito and Robert McCauley

Journal of International Money and Finance, 2020, vol. 102, issue C

Abstract: This paper analyses the factors that govern the choice of the currency composition of official foreign exchange reserves. First, we introduce a new panel dataset on the key currencies in foreign exchange reserves of about 60 economies in the 1999–2017 period. Second, we show that the currency composition of reserves relates strongly to the co-movement of the domestic currency with key currencies and the currency invoicing of trade. These factors represent attributes of the dollar or the euro rather than of the United States or the euro area. They exert about equal effects on the currency composition of foreign exchange reserves. We demonstrate that these findings are robust to a host of other possible factors.

Keywords: International reserves; Safe asset; Currency zones; Trade invoicing (search for similar items in EconPapers)
JEL-codes: F31 F32 F33 F41 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (33)

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Working Paper: The currency composition of foreign exchange reserves (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:102:y:2020:i:c:s0261560619305832

DOI: 10.1016/j.jimonfin.2019.102104

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