This study examines the determinants of the currency composition of foreign exchange reserves for both industrial and developing countries. During the period from 1976-85, our empirical results indicate that the currency composition of reserves has been influenced by each country’s exchange...

Does the choice of exchange rate regime affect the way an economy''s adjustment to real shocks? Exploiting the randomness of natural shocks, this paper assesses empirically the often contrasting answers found in the theoretical literature. The evidence supports key themes in this literature, and...

Views on the effectiveness of sterilized reserve intervention vary. Sterilized intervention is generally seen as ineffective in advanced countries while persistent intervention by some emerging markets is often cited as contributing to undervalued exchange rates and current account surpluses....

This paper assesses the optimal setting of fiscal spending and foreign exchange rate intervention policies in response to volatile foreign aid, in a small open economy model that incorporates typical features of low-income countries. Within a class of policy rules, it jointly considers the...

How should resource-rich economies handle the balance of payments adjustment required after commodity price declines? This paper addresses the question theoretically by developing a simple two-period multi-sector model based on Nakatani (2016) to compare different exchange rate policies, and...

Official accumulation of foreign reserves may be perceived as interventions to influence the exchange rate, undermining the credibility of floating exchange rates and inflation targets. This paper develops a theoretical framework to study the interaction between reserve accumulation and monetary...

We use a cross-country panel framework to analyze the effect of net official flows (chiefly foreign exchange intervention) on current accounts. We find that net official flows have a large but plausible effect on current account balances. The estimated effects are larger with instrumental...

We study the effect of foreign exchange intervention on the exchange rate relying on an instrumental-variables panel approach. We find robust evidence that intervention affects the level of the exchange rate in an economically meaningful way. A purchase of foreign currency of 1 percentage point...