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How should Central Banks accumulate reserves?

Federico Sturzenegger ()
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Federico Sturzenegger: Universidad de San Andres

No 139, Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: There has been substantial research on the benefits of accumulating foreign reserves, but less on the relative merits of how to finance those reserves. Does it matter if reserves are accumulated through unsterilized purchases, by issuing domestic currency liabilities or by issuing foreign currency liabilities? This paper explores this question by looking at the impact of different ways to finance reserve accumulation on country spreads. The results suggest that the financing source is not irrelevant. Accumulating reserves through unsterilized interventions or by issuing domestic debt, do reduce country risk. On the contrary accumulating reserves by issuing foreign liabilities seems not to have a meaningful effect.

Keywords: reserves; spreads; central banking (search for similar items in EconPapers)
JEL-codes: F3 F4 E5 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2020-05, Revised 2020-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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