scholarly journals ROLE OF GOLD IN FOREIGN EXCHANGE RESERVES OF COMMODITY EXPORTING COUNTRIES

2021 ◽  
Vol 20 (Issue Vol 20, No 2 (2021)) ◽  
pp. 211-232
Author(s):  
Viktor KOZIUK
Keyword(s):  
Interest Rates ◽  
Foreign Exchange ◽  
Portfolio Management ◽  
Commodity Prices ◽  
Foreign Exchange Reserves ◽  
Trade Shocks ◽  
Reserve Management ◽  
Declining Demand ◽  
Large Reserve

The gold is still a reserve asset with specific features yet the variants of reserve management have improved considerably. Tendency to maintain ultra-low real interest rates potentially should affect the upward shift in demand on gold because alternative costs of holding it are declining. Demand for gold has indeed risen from the side of central banks recently. At the same time, there is no consensus in economic literature about optimal share of gold in foreign exchange reserves. However, it is presumed that incentives for more diversification are stronger than reserves hoarding is abnormal. Commodity exporters have accumulated large reserve over the last decades. Thus, their diversification decisions in favour of gold seem to be natural. However, empirical analysis paints a more complicated picture. A) Commodity exporters are getting to be more and more heterogeneous in terms holding gold as a share of foreign assets. Such heterogeneity is more vivid compared to the world as a whole. B) Distribution of gold reserves among commodity exporters is changing toward increasing number of countries with gold holdings over the median size for the group. C) There is direct correlation between global commodity prices and gold holdings in tons, but an inverse relationship in the case of share of gold in reserves. This leads to the conclusion that there are two types of demand on gold: endogenous as a function of gradual hoarding of foreign exchange reserves, and specific, that is driven by specific portfolio management needs and non-economic factors. This finding is consistent with features of holding reserves in countries with large hoarding and strong vulnerability to terms-of-trade shocks and features of political regimes in countries with resource abundance.

International Practices in Foreign Exchange Reserves Management

2016 ◽  
Vol 60 (2) ◽  
pp. 40-51
Author(s):  
S. Narkevich
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Portfolio Management ◽  
Central Banks ◽  
Two Dimensions ◽  
Optimal Size ◽  
Foreign Exchange Reserves ◽  
Management Framework ◽  
Reserve Management ◽  
Portfolio Managers

The paper explores modern international practices in foreign exchange reserves management. First, key goals of FX reserves management are presented. According to the goals, there are two dimensions of reserve portfolio management that are employed by monetary authorities: achieving optimal size of the portfolio and constructing optimal structure of the portfolio. Then, general rules of FX reserves management are discussed. Best practices developed by IMF and major world central banks require several salient features to be implemented into the reserve management framework. The strategy of reserve management and its targets should be clearly defined with basic principles ingrained in the everyday routine of portfolio managers. Technological and organizational practices should produce a reliable and efficient operational system that processes transactions quickly and without interruptions. Sufficient flexibility and possibilities for upgrade should be factored into all IT-systems. Reserve facilities and back-up systems need to be created and installed in advance so that they can be put into use instantly and provide uninterrupted functioning and transactions execution. Risk management framework should incorporate rules dealing with all major types of risks and at the same time meeting operational targets that are specific to central banks as portfolio managers. Thus, among the most important questions of risk management is matching ample liquidity of the portfolio with the necessity to maintain its value and provide some extra yield. This directly influences the asset structure of FX reserves portfolio with large share of high-rated and liquid assets (mostly sovereign issued bonds). Finally, FX reserves management system in Japan and Norway are analyzed. With 2nd largest reserves portfolio in the world Japan pays surprisingly low attention to FX portfolio management keeping most of its reserves in highly liquid US-issued papers. Norway’s experience of managing its oil and gas revenues provides insights in how it should be done in an efficient manner for a resource-exporting country.

The roundabout from interest rates to commodity prices in China: The role of money flow

2019 ◽  
Vol 61 ◽  
pp. 627-642
Author(s):  
Zesheng Sun ◽  
Yaoqing Wang ◽  
Xu Zhou ◽  
Lunan Yang
Keyword(s):  
Interest Rates ◽  
Commodity Prices ◽  
Money Flow

scholarly journals Management of Foreign Exchange Reserves of the European Central Bank

2021 ◽  
Vol 127 ◽  
pp. 499-512
Author(s):  
Paweł Sitek
Keyword(s):  
Central Bank ◽  
Foreign Exchange ◽  
European Central Bank ◽  
Central Banks ◽  
Future Generations ◽  
Management Policy ◽  
Foreign Exchange Reserves ◽  
Foreign Reserve ◽  
European Central ◽  
Reserve Management

The aim of the article is to analyze the foreign exchange reserves of the European Central Bank and the methods of their modern management. As a result of the study, it was proven that when implementing foreign reserve management policy, the European Central Bank and national central banks should pursue the objectives of the current monetary policy for future generations. Foreign exchange reserves are a special good that only the current generation and the current government cannot use. The character of the article implies different research methods: analysis of the sources of law, legal dogmatic, comparative dogmatic method. The analysis carried out as part of the study indicates that management of foreign exchange reserves of ECB has an impact on intergenerational justice.

scholarly journals Changes in Macroeconomic conditions and capital Return in Indonesia

2020 ◽  
Vol 11 (3) ◽  
pp. 320-328
Author(s):  
Andesta Selvi ◽  
Adam Mohammad ◽  
. Suhel
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Stock Returns ◽  
Money Supply ◽  
Foreign Exchange ◽  
Capital Market ◽  
Company Performance ◽  
Foreign Exchange Reserves ◽  
Exchange Rate Changes ◽  
Investment Process

Purpose: this study aims to examine the influence of changes in inflation, changes in the rupiah exchange rate, changes in the money supply, changes in SBIS, changes in foreign exchange reserves and changes in interest rates on the return of Indonesian Islamic stocks.Methods: this study is focused on looking at conditions of macroeconomic changes that have an impact on the activity of the Islamic capital market, particularly on the return of Islamic stocks listed in the Jakarta Islamic Index. This empirical evidence is related to variable macroeconomic changes, namely changes in inflation, rupiah exchange rate, money supply, foreign exchange reserves, Indonesian Syariah Bank Certificates (SBIS) and interest rates on sharia stock returns for the period January 2014 – December 2019 obtained from Financial publications. Service Authority (OJK) and Bank Indonesia. The analysis technique used is quantitative analysis using multiple regression analysis tools.Results: the results of this study are (1) Variable Changes in Inflation, Changes in the Amount of Money Supply, Changes in Foreign Exchange Reserves, Changes in SBIS have a positive and significant effect on Stock Returns listed on the Jakarta Islamic Index, (2) changes in exchange rates have a negative and significant effect on Stock Returns listed in Jakarta Islamic. Index, (3) the Interest Rate variable has no effect on Stock Returns listed on the Jakarta Islamic Index.Conclusions and Relevance: the approach used by each variable starts with the conventional followed by the study of Islamic macroeconomics, in order to provide a philosophy of science and economics that refers to Baqir Sadr in the Iqtishaduna book. In this study, researchers examined macroeconomic variables on sharia stock returns to prioritize people's welfare and pay close attention to every investment process based on sharia principles. Therefore the public, entrepreneurs, investors and company performance must pay attention to information regarding changes in inflation, changes in the rupiah exchange rate, changes in the money supply, changes in Bank Indonesia Sharia Certificates (SBIS), changes foreign exchange reserves, and changes in interest rates in order to minimize risks for both investors and entrepreneurs. This variable can affect the movement of the capital market so that the return on Islamic stocks also has an effect.

scholarly journals Foreign Exchange Reserves and the Macro-economy in the GCC Countries

2017 ◽  
Vol 6 (3) ◽  
pp. 72
Author(s):  
Samih Antoine Azar ◽  
Wael Aboukhodor
Keyword(s):  
Interest Rates ◽  
Foreign Exchange ◽  
Oil Prices ◽  
The Other ◽  
Real Effective Exchange Rate ◽  
Foreign Exchange Reserves ◽  
Significant Relationships ◽  
Gcc Countries ◽  
Other Hand ◽  
Effective Exchange

This research looks into the accumulation of foreign exchange reserves and the development of the macro-economy in the Gulf and Cooperation Council countries (GCC countries), namely, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Using yearly data covering the period from 1996 through 2015, the empirical results show positive and significant relationships between foreign exchange reserves accumulation on one hand, and oil prices, GDP, the ratio of current account to GDP, and the ratio of broad money to GDP on the other hand. Moreover, the results point to negative and significant relationships between foreign exchange reserves accumulation on one hand, and real effective exchange rate, the ratio of debt to GDP, and call money rates on the other hand. However, the results show that the stockpile of foreign exchange reserves in the GCC countries is not sensitive to nominal effective exchange rates, neither to the ratio of imports to GDP, and nor to interest rates on the US Dollar. Furthermore, the study shows a robust and positive link between foreign exchange reserves and oil prices on the one hand and economic growth in these countries on the other hand. 

To devalue or not to devalue?

2011 ◽  
Vol 61 (3) ◽  
pp. 255-279
Author(s):  
V. Popov
Keyword(s):  
Exchange Rate ◽  
Interest Rates ◽  
Foreign Exchange ◽  
Currency Crises ◽  
Flexible Exchange Rate ◽  
Output Growth ◽  
Balance Of Payments ◽  
Foreign Exchange Reserves ◽  
East European ◽  
Domestic Prices

If there is a negative terms of trade or financial shock leading to the deterioration in the balance of payments, there are two basic options for a country that has limited foreign exchange reserves. First, a country can maintain a fixed exchange rate (or even a currency board) and wait until the reduction of foreign exchange reserves leads to the reduction of money supply: this will drive domestic prices down and stimulate exports, raise interest rates and stimulate the inflow of capital, and finally will correct the balance of payments. Second, the country can allow the devaluation of national currency — flexible exchange rate will automatically bring the balance of payments back into the equilibrium. Because national prices are less flexible than exchange rates, the first type of adjustment is associated with the greater reduction of output.The empirical evidence on East European countries and other transition economies for the 1998–99 period (outflow of capital after the 1997 Asian and 1998 Russian currency crises and slowdown of output growth rates) suggests that the second type of policy response (devaluation) was associated with smaller loss of output than the first type (monetary contraction). The 2008–09 developments provide additional evidence for this hypothesis.

scholarly journals ANALISIS MAKRO EKONOMI TERHADAP CADANGAN DEVISA INDONESIA (MELALUI PENDEKATAN MONETER)

2015 ◽  
Vol 4 (2) ◽  
pp. 127
Author(s):  
Novri Candra ◽  
Idris Idris ◽  
Selli Nelonda
Keyword(s):  
Exchange Rates ◽  
Interest Rates ◽  
Error Correction ◽  
Foreign Exchange ◽  
National Income ◽  
Foreign Exchange Reserves ◽  
Short Term ◽  
Negative Effect ◽  
Positive Effect

This study aimed to analyze the change in foreign exchange reserves which are affected by the state of national income, exchange rates, interest rates and inflation. This study was conducted to see the effect of the independent variable on the dependent variable in the long term and short term. The method used is the Error Correction Model (ECM). This study shows that the long-term effects of the variables national income and the exchange rate has a significant positive effect on foreign exchange reserves, while in the short term have a negative effect but not significant. Variable interest rates on long-term have a positive effect but not significant and in the short term have a significant negative effect on foreign exchange reserves. Variable inflation in the long term and short term no significant effect on the foreign exchange reserves. Results Error Correction Term (ECT) in this study amounted to 1,065, which means that in the short-term foreign exchange reserves will undergo considerable change and requires quite a long time to come back into balance.Keyword : Reserves, National Income, Exchange Rates, Interest Rates and Inflation ECM, ECT

scholarly journals Managing Foreign Exchange Inflows: An Analysis of Sterilisation in Pakistan

2005 ◽  
Vol 44 (4II) ◽  
pp. 777-792
Author(s):  
Asad Jan ◽  
Ather Elahi ◽  
M. A. Zahid
Keyword(s):  
Foreign Exchange ◽  
Capital Inflows ◽  
Exchange Market ◽  
Foreign Exchange Reserves ◽  
Local Currency ◽  
Monetary Authorities ◽  
Export Competitiveness ◽  
Capital Outflows ◽  
Trade And Exchange

A number of developing countries from Asia, Latin America and Eastern Europe have experienced surge in capital inflows during recent years.1 These inflows have potential effects on macroeconomic stability; export competitiveness, and inflation. If not properly managed, these inflows can induce appreciation of local currency leading to serious repercussions for the rest of the economy. Under these conditions, the proactive role of monetary authorities in the management of capital inflows was highly desirable, wherein they intervened in the domestic exchange market in order to contain volatility in exchange rate besides accumulation of foreign exchange reserves. The main instruments available to deal with the possible effects of large capital inflows include sterilised intervention, fiscal tightening, trade and exchange liberalisation including easing controls on capital outflows. The foreign exchange interventions are typically accompanied by active sterilisation policy to keep inflation under control.

scholarly journals Sudden Stops in Emerging Economies: The Role of World Interest Rates and Foreign Exchange Intervention

2021 ◽  
Vol 2020 (405) ◽  
Author(s):  
J. Scott Davis ◽  
◽  
Michael B. Devereux ◽  
Changhua Yu ◽  
◽  
...  
Keyword(s):  
Interest Rates ◽  
Foreign Exchange ◽  
Emerging Economies ◽  
Sudden Stops ◽  
Foreign Exchange Intervention
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