EconPapers    
Economics at your fingertips  
 

The Accumulation of Foreign Exchange by Central Banks: Fear of Capital Mobility?

Andreas Steiner ()

No 85, IEER Working Papers from Institute of Empirical Economic Research, Osnabrueck University

Abstract: Foreign exchange holdings by central banks have increased significantly in the recent past. This article explains this development as a result of the liberalization of international capital markets. First, central banks accumulate reserves in order to protect the economy from potentially detrimental effects of sudden stops of capital flows and flow reversals. Second, central banks use the accumulation of reserves as a substitute for capital controls. Changes in the level of reserves are a form to manage net capital inflows. They permit the central bank to preserve some leeway for an independent monetary and financial policy despite the classic policy trilemma. The empirical analysis of a large panel data set supports the hypothesis that the accumulation of reserves is the consequence of a “fear of capital mobility” suffered by central banks.

Keywords: International Reserves; Capital Mobility; Macroeconomic Trilemma (search for similar items in EconPapers)
JEL-codes: E58 F31 (search for similar items in EconPapers)
Pages: 35
Date: 2010-10-25
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://web.fb9.uni-osnabrueck.de/repec/iee/wpaper/12906268_WP_85.pdf (application/pdf)

Related works:
Journal Article: The accumulation of foreign exchange by central banks: Fear of capital mobility? (2013) Downloads
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:iee:wpaper:wp0085

Access Statistics for this paper

More papers in IEER Working Papers from Institute of Empirical Economic Research, Osnabrueck University Rolandstrasse 8, 49069 Osnabrueck. Contact information at EDIRC.
Bibliographic data for series maintained by Karin Wessler-Rensmann ().

 
Page updated 2020-09-19
Handle: RePEc:iee:wpaper:wp0085