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On the use of sterilisation bonds in emerging Asia

In: Are central bank balance sheets in Asia too large?

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  • Aaron Mehrotra

    (Bank for International Settlements)

Abstract

We document recent developments in the use of sterilisation bonds by six central banks in emerging Asia, and discuss the implications for monetary policy and the financial sector. An important development in the sterilisation of foreign exchange interventions in past years has been the frequent use of central banks’ own paper. There has been an attempt to lengthen the maturity structure of sterilisation bills, and maturities have risen, especially in 2010–11. The choice of sterilisation instrument is likely to depend partly on their relative costs. In particular, as the yield on central bank securities has fallen relative to the rate of remuneration of required reserves, some central banks in Asia have increasingly used central bank securities for sterilisation.

(This abstract was borrowed from another version of this item.)

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This chapter was published in:

  • Bank for International Settlements, 2012. "Are central bank balance sheets in Asia too large?," BIS Papers, Bank for International Settlements, number 66, May.
    This item is provided by Bank for International Settlements in its series BIS Papers chapters with number 66-06.

    Handle: RePEc:bis:bisbpc:66-06

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    References

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    1. David Cook & James Yetman, 2012. "Expanding central bank balance sheets in emerging Asia: a compendium of risk and some evidence," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 30-75 Bank for International Settlements.
    2. Joshua Aizenman & Jaewoo Lee, 2005. "International reserves: precautionary versus mercantilist views, theory and evidence," Proceedings, Federal Reserve Bank of San Francisco.
    3. Joshua Aizenman & Reuven Glick, 2008. "Sterilization, monetary policy, and global financial integration," Working Paper Series 2008-15, Federal Reserve Bank of San Francisco.
    4. Kumhof, Michael, 2004. "Sterilization of short-term capital inflows--through lower interest rates?," Journal of International Money and Finance, Elsevier, vol. 23(7-8), pages 1209-1221.
    5. Andrew Filardo & Stephen Grenville, 2012. "Central bank balance sheets and foreign exchange rate regimes: understanding the nexus in Asia," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 76-110 Bank for International Settlements.
    6. Reinhart, Carmen M & Reinhart, Vincent R, 1999. "On the Use of Reserve Requirements in Dealing with Capital Flow Problems," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(1), pages 27-54, January.
    7. Michael Geiger, 2008. "Instruments Of Monetary Policy In China And Their Effectiveness: 1994–2006," UNCTAD Discussion Papers 187, United Nations Conference on Trade and Development.
    8. Andrew Filardo & Madhusudan Mohanty & Ramon Moreno, 2012. "Central bank and government debt management: issues for monetary policy," BIS Papers chapters, in: Bank for International Settlements (ed.), Fiscal policy, public debt and monetary policy in emerging market economies, volume 67, pages 51-71 Bank for International Settlements.
    9. Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010. "China as a reserve sink: The evidence from offset and sterilization coefficients," Journal of International Money and Finance, Elsevier, vol. 29(5), pages 951-972, September.
    10. Rakesh Mohan, 2008. "Capital flows to India," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 235-263 Bank for International Settlements.
    11. Yunyong Thaicharoen & Nasha Ananchotikul, 2008. "Thailand’s experiences with rising capital flows: recent challenges and policy responses," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 427-465 Bank for International Settlements.
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    Cited by:
    1. Jaime Caruana, 2012. "Why central bank balance sheets matter," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 2-9 Bank for International Settlements.
    2. Szilárd Erhart & Gergely Kicsák & Zsolt Kuti & Zoltán Molnár & Zoltán Monostori, 2013. "Doing it differently or The impact of the financial crisis on central bank balance sheets in emerging economies," MNB Bulletin, Magyar Nemzeti Bank (the central bank of Hungary), vol. 8(Special), pages 46-60, October.
    3. Andrew Filardo & James Yetman, 2012. "Key facts on central bank balance sheets in Asia and the Pacific," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 10-29 Bank for International Settlements.
    4. Andrew Filardo & Madhusudan Mohanty & Ramon Moreno, 2012. "Central bank and government debt management: issues for monetary policy," BIS Papers chapters, in: Bank for International Settlements (ed.), Fiscal policy, public debt and monetary policy in emerging market economies, volume 67, pages 51-71 Bank for International Settlements.
    5. Andrew Filardo & James Yetman, 2012. "The expansion of central bank balance sheets in emerging Asia: what are the risks?," BIS Quarterly Review, Bank for International Settlements, June.

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