Well developed financial markets are a necessary condition for a currency to play a role as a reserve currency. The introduction of the euro greatly improved the functioning of euro financial markets. This paper investigates whether euro financial markets have developed sufficiently to...

Explaining exchange rates has long been an important but vexing issue in international economics and finance. In recent years, a number of studies have shown that investors' private information plays a central role in determining exchange rates. We demonstrate in this paper that the private...

We compare the banking crises in 2008-09 and in the Great Depression, and analyse differences in the policy response to the two crises in light of the prevailing international monetary systems. The scale of the 2008-09 banking crisis, as measured by falls in international short-term indebtedness...

Recurrent capital inflows pose important challenges for authorities in emerging market economies seeking to preserve financial stability. Raising interest rates to dampen imbalances that could arise from capital flows can also attract more capital inflows and accentuate appreciation pressures....

We examine the liquidity effects of the euro area sovereign debt crisis, including its effects on euro area banks as a group, on intra-euro area financial flows, on the supply of and demand for collateral, and on international liquidity. The lending capacity of the euro area banking system has...

We examine the international propagation of the financial crisis of 2008, and compare it with that of the crisis of 1931. We argue that the collateral squeeze in the United States, which became intense after the failure of Lehman Brothers created doubts about the stability of other financial...

Central banks' frameworks for managing foreign reserves have traditionally balanced a triad of objectives: liquidity, safety and return. Pursuing these objectives involves explicit trade-offs. More of an emphasis on returns, for instance, may require central banks to sacrifice some of the safety...

We show that the FX impact of monetary policy has been growing significantly. We use a high-frequency event study of the joint response of fixed income instruments and exchange rates to monetary policy news from seven major central banks spanning 2004-2015. News affecting short maturity bonds...

We employ a rarely available high-frequency micro dataset to study the impact of foreign exchange intervention on domestic credit growth. We find that sterilised purchases of dollars by the central bank dampens the flow of new domestic corporate loans in Colombia. Slowing the pace of currency...

This paper analyses the factors that govern the choice of the currency composition of official foreign exchange reserves. First, we introduce a new panel dataset on the key currencies in foreign exchange reserves of about 60 economies in the 1999-2017 period. Second, we show that the currency...