IMF paper looks at central banks’ use of forex reserves
Reserves used more for liquidity than for investment in decade since financial crisis, researchers find
Central banks significantly increased the amount of their foreign exchange reserves used for investment in the decade before 2008, a paper published by the International Monetary Fund shows.
The paper argues that over the last two decades, central banks have divided their foreign reserves between “liquidity tranches” and “investment tranches”. The size of the latter grew before the financial crisis but has since remained relatively stable while the aggregate reserves increased, the authors find
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