Not All Foreign Exchange Reserves Are Created Alike

We analyze an aspect of the international monetary system that has been the subject of little research: the distinction between foreign exchange reserves held as deposits and held as securities. We assemble new data for 109 countries in the period 1950-2022 based on previously unutilized statistics from central bank annual reports. We show that there has been movement since the late 1990s toward holding a larger share of reserves in the form of securities. Securities now account for almost two-thirds of total foreign exchange reserves, up from one-third a quarter century ago. This shift is concentrated in the decade between the emerging market crises of the late 1990s and the 2008 global financial crisis. It is associated with the accumulation of excess reserves, what central bank reserve managers refer to as the †investment tranche†of their reserve portfolios.