IDEAS home Printed from https://ideas.repec.org/p/zbw/bofrdp/rdp1992_017.html
   My bibliography  Save this paper

The Ecu and reserve management

Author

Listed:
  • Bingham, T.R.G.

Abstract

The exceptional growth of the Ecu financial market during the past decade and a half has important implications for international reserve management strategies, particularly of countries outside the EMS linking their currencies to the Ecu. After examining the various criteria used to determine the currency composition of a central bank's reserve portfolio (maintenance of confidence in the exchange rate, minimisation of transactions costs, maintenance of the value of reserves in terms of imports, achievement of goals with respect to liquidity, risk and return), the paper considers the strengths and weaknesses of the Ecu as a reserve currency. It· concludes that, despite the absence of a single lender of last resort and the need to develop the clearing and settlement system for private Ecus, the Ecu has clear advantages as a reserve asset, The principal arguments for holding a part of the reserve portfolio in this unit are increased credibility of the Ecu Jink, absence of offsetting action by, or pressure from, another central bank of issue and a reduced mismatch between assets and liabilities leading to greater stability of revenue.

Suggested Citation

  • Bingham, T.R.G., 1992. "The Ecu and reserve management," Bank of Finland Research Discussion Papers 17/1992, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp1992_017
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/211646/1/bof-rdp1992-017.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dellas, Harris & Bang Yoo, Chin, 1991. "Reserve currency preferences of central banks: the case of Korea," Journal of International Money and Finance, Elsevier, vol. 10(3), pages 406-419, September.
    2. Michael P. Dooley & J. Saul Lizondo & Donald J. Mathieson, 1989. "The Currency Composition of Foreign Exchange Reserves," IMF Staff Papers, Palgrave Macmillan, vol. 36(2), pages 385-434, June.
    3. de Macedo, Jorge Braga, 1983. "Optimal currency diversification for a class of risk-averse international investors," Journal of Economic Dynamics and Control, Elsevier, vol. 5(1), pages 173-185, February.
    4. repec:zbw:bofrdp:1992_014 is not listed on IDEAS
    5. repec:zbw:bofrdp:1992_004 is not listed on IDEAS
    6. Koskela, Erkki & Viren, Matti, 1992. " Inflation, Capital Markets and Household Saving in the Nordic Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 215-227.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bingham, T.R.G., 1992. "The Ecu and reserve management," Research Discussion Papers 17/1992, Bank of Finland.
    2. repec:zbw:bofrdp:1992_017 is not listed on IDEAS
    3. Papaioannou, Elias & Portes, Richard & Siourounis, Gregorios, 2006. "Optimal currency shares in international reserves: The impact of the euro and the prospects for the dollar," Journal of the Japanese and International Economies, Elsevier, vol. 20(4), pages 508-547, December.
    4. Zhichao Zhang & Li Ding & Fan Zhang & Zhuang Zhang, 2015. "Optimal Currency Composition for China's Foreign Reserves: A Copula Approach," The World Economy, Wiley Blackwell, vol. 38(12), pages 1947-1965, December.
    5. De Bromhead, Alan & Jordan, David & Kennedy, Francis & Seddon, Jack, 2021. "How does international monetary leadership end? The Sterling Area revisited," QUCEH Working Paper Series 21-02, Queen's University Belfast, Queen's University Centre for Economic History.
    6. Alan de Bromhead & David Jordan & Francis Kennedy & Jack Seddon, 2023. "Sterling's farewell symphony: The end of the Sterling Area revisited," Economic History Review, Economic History Society, vol. 76(2), pages 415-444, May.
    7. Elias Papaioannou & Richard Portes, 2008. "The international role of the euro: a status report," European Economy - Economic Papers 2008 - 2015 317, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    8. Soesmanto, Tommy & Selvanathan, Eliyathamby A. & Selvanathan, Saroja, 2015. "Analysis of the management of currency composition of foreign exchange reserves in Australia," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 82-89.
    9. 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.
    10. Roland Beck & Sebastian Weber, 2011. "Should Larger Reserve Holdings Be More Diversified?," International Finance, Wiley Blackwell, vol. 14(3), pages 415-444, December.
    11. repec:zbw:bofrdp:1989_028 is not listed on IDEAS
    12. Rikkonen, Kaija-Leena, 1989. "The optimal currency distribution of a central bank's foreign exchange reserves," Research Discussion Papers 28/1989, Bank of Finland.
    13. Beck, Roland & Rahbari, Ebrahim, 2008. "Optimal reserve composition in the presence of sudden stops: the euro and the dollar as safe haven currencies," Working Paper Series 916, European Central Bank.
    14. Levy Yeyati, Eduardo & Sturzenegger, Federico, 2000. "Implications of the euro for Latin America's financial and banking systems," Emerging Markets Review, Elsevier, vol. 1(1), pages 53-81, May.
    15. Barry Eichengreen & Arnaud Mehl & Livia Chiţu & Thorsten Beck, 2019. "Mars or Mercury? The geopolitics of international currency choice," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 34(98), pages 315-363.
    16. Aizenman, Joshua & Ito, Hiro & Pasricha, Gurnain Kaur, 2022. "Central bank swap arrangements in the COVID-19 crisis," Journal of International Money and Finance, Elsevier, vol. 122(C).
    17. Jorge Braga de Macedo & Jeffrey Goldstein & David Meerschwam, 1984. "International Portfolio Diversification: Short-Term Financial Assets and Gold," NBER Chapters, in: Exchange Rate Theory and Practice, pages 199-238, National Bureau of Economic Research, Inc.
    18. Falk Hendrik Laser & Jan Weidner, 2022. "Currency Compositions of International Reserves and the Euro Crisis," Open Economies Review, Springer, vol. 33(5), pages 917-944, November.
    19. Edwin M. Truman & Anna Wong, 2006. "The Case for an International Reserve Diversification Standard," Working Paper Series WP06-2, Peterson Institute for International Economics.
    20. Lehmussaari, Olli-Pekka & Suvanto, Antti & Vajanne, Laura, 1992. "The currency band and credibility : The Finnish experience," Research Discussion Papers 37/1992, Bank of Finland.
    21. repec:zbw:bofrdp:1992_004 is not listed on IDEAS
    22. Chinn, Menzie D. & Ito, Hiro & McCauley, Robert N., 2022. "Do central banks rebalance their currency shares?," Journal of International Money and Finance, Elsevier, vol. 122(C).
    23. Marc-André Gosselin & Nicolas Parent, 2005. "An Empirical Analysis of Foreign Exchange Reserves in Emerging Asia," Staff Working Papers 05-38, Bank of Canada.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:bofrdp:rdp1992_017. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/bofgvfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.