EconPapers    
Economics at your fingertips  
 

Exchange Rate Targeting and Gold Demand by Central Banks: Modeling International Reserves Composition

Aleksandr Gevorkyan and Tarron Khemraj

Emerging Markets Finance and Trade, 2019, vol. 55, issue 1, 168-180

Abstract: This article explores the composition of international reserves under a central bank’s exchange rate policy target. The model allows for numerical estimation of a shadow price of the target exchange rate, interpreted as the central bank’s sacrifice of policy precision for additional unit of portfolio variance or return. The simulations indicate a percentage range gold demand by monetary authority in two regimes under multiple equilibria. Accumulating foreign reserves as precautionary policy suggests increasing shares of gold demand. The central bank would incur greater exchange rate target sacrifice if it wants to achieve higher portfolio returns. The results suggest that ability to target the exchange rate is unaffected by the higher volatility of monthly returns on gold.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2018.1425136 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:55:y:2019:i:1:p:168-180

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2018.1425136

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

 
Page updated 2024-04-07
Handle: RePEc:mes:emfitr:v:55:y:2019:i:1:p:168-180