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Asia's Sovereign Wealth Funds and Reform of the Global Reserve System

Author

Listed:
  • Donghyun PARK

    (Economics and Research Department (ERD), Asian Development Bank (ADB), 6 ADB Avenue, Mandaluyong City, PHILIPPINES 1550)

  • Andrew Rozanov

    (Permal Investment Management Services Limited)

Abstract

This paper explores the potential contribution of Asia’s sovereign wealth funds (SWFs) to the reform of the global foreign exchange reserve system. By diversifying the investment of Asia’s huge reserves into non-dollar denominated assets, Asian SWFs can help to dilute the dominant role of the US dollar as the global reserve currency. At the same time, by exposing reserve managers to a more diverse mix of currencies and asset classes, SWFs will better prepare them for the less dollar-centric global reserve system of the future. In addition to SWFs, other innovative policy options for more active reserve management include transferring some surplus reserves into national pension funds or into exchange traded funds which are distributed among local investors. Regardless of the exact form of more profit-oriented reserve management, it will require that countries build up a critical mass of skills and expertise in wealth preservation and management.

Suggested Citation

  • Donghyun PARK & Andrew Rozanov, 2010. "Asia's Sovereign Wealth Funds and Reform of the Global Reserve System," Economic Growth Centre Working Paper Series 1003, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
  • Handle: RePEc:nan:wpaper:1003
    as

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    File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2010/2010-03.pdf
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    References listed on IDEAS

    as
    1. Joshua Aizenman & Jaewoo Lee, 2007. "International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence," Open Economies Review, Springer, vol. 18(2), pages 191-214, April.
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    More about this item

    Keywords

    Foreign exchange reserves; global reserve system; global financial architecture; pension fund; exchange traded fund;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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