Central banks' international reserves have increased significantly in the recent past. While this accumulation has been widely perceived as precautionary savings to prevent financial crises, rising reserves might also endanger monetary and financial stability. This paper sheds new light on the...

Foreign exchange holdings by central banks have increased significantly in the recent past. This article explains this development as a result of the liberalization of international capital markets. First, central banks accumulate reserves in order to protect the economy from potentially...

Central banks' international reserve holdings have increased significantly in the recent past. While traditional models fail to explain this accumulation of reserves, the more recent literature argues that reserves are used as a lifejacket against currency crises. However, research so far has...