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How should Central Banks accumulate reserves?

Author

Listed:
  • Federico Sturzenegger

    (Universidad de San Andres)

Abstract

There has been substantial research on the benefits of accumulating foreign reserves, but less on the relative merits of how to finance those reserves. Does it matter if reserves are accumulated through unsterilized purchases, by issuing domestic currency liabilities or by issuing foreign currency liabilities? This paper explores this question by looking at the impact of different ways to finance reserve accumulation on country spreads. The results suggest that the financing source is not irrelevant. Accumulating reserves through unsterilized interventions or by issuing domestic debt, do reduce country risk. On the contrary accumulating reserves by issuing foreign liabilities seems not to have a meaningful effect.

Suggested Citation

  • Federico Sturzenegger, 2020. "How should Central Banks accumulate reserves?," Working Papers 139, Universidad de San Andres, Departamento de Economia, revised May 2020.
  • Handle: RePEc:sad:wpaper:139
    as

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    File URL: https://webacademicos.udesa.edu.ar/pub/econ/doc139.pdf
    File Function: First version, May 2020
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    References listed on IDEAS

    as
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    Cited by:

    1. Cachanosky, Nicolás & Ferrelli Mazza, Federico Julián, 2021. "Why did inflation targeting fail in Argentina?," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 102-116.

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    More about this item

    Keywords

    reserves; spreads; central banking;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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