Central Bank´s Foreign Exchange Reserves Accumulation and Dynamics of Banking System Liquidity Absorption: The Case of the Czech Republic, Poland and Hungary
The paper deals with accumulation of foreign exchange reserves of central banks and its consequences in banking system liquidity management. In theoretical part the case of banking system liquidity surplus is analyzed focusing on creation of liquidity through FX operations, sterilization of liquidity and main sources of liquidity absorption. In this context it is analyzed how monetary policy instruments (on outright or repo basis) enable central bank to react on volatility of banking system liquidity needs and to cover issued currency in circulation and bank´s reserves by net foreign assets. In empirical part these problems are analyzed and compared using the example of the Czech Republic, Poland and Hungary. The paper focuses on main differences in the level of liquidity surplus, cost of sterilization, volatility of spread between O/N reference interest rate and main policy rate, main sources of liquidity absorption and dynamics of currency in circulation and reserves covering by net foreign assets.
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Volume (Year): 2010 (2010)
Issue (Month): 6 ()
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Palgrave Macmillan, vol. 52(2), pages 289-310, September.
- Martin Cincibuch & Tomáš Holub & Jaromír Hurník, 2009.
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Charles University Prague, Faculty of Social Sciences, vol. 59(3), pages 190-215, August.
- Beck, Roland & Rahbari, Ebrahim, 2011. "Optimal reserve composition in the presence of sudden stops," Journal of International Money and Finance, Elsevier, vol. 30(6), pages 1107-1127, October.
- Peter Stella, 2002. "Central Bank Financial Strength, Transparency, and Policy Credibility," IMF Working Papers 02/137, International Monetary Fund.
- Alfred Broaddus, Jr. & Marvin Goodfriend, 2001. "What assets should the Federal Reserve buy?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 7-22.
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