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This paper tests whether reserve portfolios respond to exchange rate changes with a portfolio rebalancing strategy, which requires the purchase of depreciating currencies and sale of appreciating ones. The paper finds empirical support for the strategy, in particular that dollar depreciation/appreciation results in rebalancing switches vis-a-vis the other major reserve currency, the euro; valuation changes in the minor currencies tend to result in switches among themselves. The finding implies that currency diversifications in response to exchange rate changes have thus far tended to be stabilizing for exchange markets; it also helps explain the relative stability of reserve currency shares.

Finance: General --- Foreign Exchange --- Money and Monetary Policy --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- International Financial Markets --- Monetary economics --- Currency --- Foreign exchange --- Finance --- Currencies --- Exchange rates --- Exchange rate adjustments --- Currency markets --- Reserve currencies --- Money --- Foreign exchange market --- United States --- Foreign exchange rates --- Portfolio management --- Econometric models.

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Foreign exchange intervention (FXI) is a highly debated topic. Yet, comprehensive and comparable data on FXI is hard to find. This paper provides a new dataset of FXI covering a large number of countries over the period 2000-20 at monthly and quarterly frequencies. It includes publicly available data for about 40 countries and carefully constructed proxies for 122 countries. Proxies are focused on both spot and derivative transactions that alter the central bank’s foreign currency position and account for a wide range of central bank operations, including vis-à-vis residents, the first proxy to do so to our knowledge. The paper discusses the merits of the new proxy relative to coarser measures traditionally used like the change in reserves, and potential definitional differences with published data. The paper also presents stylized facts using our newly constructed FXI proxies.

Banks and Banking --- Foreign Exchange --- Money and Monetary Policy --- International Monetary Arrangements and Institutions --- Central Banks and Their Policies --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Monetary Policy --- Monetary economics --- Banking --- Currency --- Foreign exchange --- Reserve currencies --- Reserve positions --- Currencies --- International reserves --- Foreign exchange intervention --- Money --- Central banks --- Foreign exchange reserves --- Hong Kong Special Administrative Region, People's Republic of China

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What determines the currency to which countries peg or "anchor" their exchange rate? Data for over 100 countries between 1980 and 1998 reveal that trade network externalities are a key determinant. This implies that anchor currency choice may well be suboptimal in that certain currencies, e.g., the U.S. dollar, could be oversubscribed. It also implies that changes in anchor choices by a small number of countries can have large and rapid effects on the international monetary system. Other factors found to be related to anchor choice include the symmetry of output shocks and the currency denomination of liabilities.

Foreign exchange rates. --- Foreign exchange administration. --- Coinage, International. --- International coinage --- International money --- Money, International --- Exchange rates --- Fixed exchange rates --- Flexible exchange rates --- Floating exchange rates --- Fluctuating exchange rates --- Foreign exchange --- Rates of exchange --- Rates --- Currency question --- Monetary unions --- Money --- Exports and Imports --- Foreign Exchange --- Money and Monetary Policy --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Financial Aspects of Economic Integration --- Monetary economics --- Currency --- International economics --- Reserve currencies --- Currencies --- Exchange rate arrangements --- United States

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This paper examines the determinants of the currency composition of international reserves. Our single most important finding is the striking stability over time of the relationship between the demand for reserves denominated in different currencies and its principal determinants: trade flows, financial flows and currency pegs. This result contrasts sharply with recent predictions of sharp shifts in the currency composition of central banks’ holdings of foreign exchange. The message would seem to be that in this, as in other respects, the international monetary system is in a mode of gradual, continuous evolution, not of rapid, discontinuous change.

Banks and Banking --- Money and Monetary Policy --- Finance: General --- Foreign Exchange --- International Monetary Arrangements and Institutions --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Monetary Policy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: General (includes Measurement and Data) --- Monetary economics --- Banking --- Finance --- Currencies --- International reserves --- Reserve currencies --- International monetary system --- Money --- Central banks --- International capital markets --- Financial markets --- Foreign exchange reserves --- International finance --- Banks and banking --- Capital market --- United States

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The paper examines the usage of the Renminbi (RMB) as an international payment currency. Globally, the use of RMB remains small, accounting for 2 percent of total cross-border transactions. Using country-level transaction data from Swift** for 2010–21, we find significant regional variations in the use of RMB for cross-border payments. While RMB is little used in some regions, it has gained traction in others, and these cross-country differences have widened over the years. Such differences can be partly explained by an economy’s geographic distance, political distance, and trade linkages with China. However, it also reflects the impact of policy measures by the People’s Bank of China, including establishing bilateral swap lines and offshore clearing banks. Both policy measures helped to address offshore RMB liquidity shortages given China’s overall capital account restrictions, with the offshore clearing banks having a quantitatively larger impact. Our analysis contributes to a better understanding of the growing importance of RMB within the international monetary system.

Macroeconomics --- Economics: General --- Money and Monetary Policy --- Banks and Banking --- Exports and Imports --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- International Monetary Arrangements and Institutions --- International Lending and Debt Problems --- Current Account Adjustment --- Short-term Capital Movements --- Economic & financial crises & disasters --- Economics of specific sectors --- Monetary economics --- Banking --- International economics --- Offshore financial centers --- Financial services --- Currencies --- Money --- Capital account --- Balance of payments --- Reserve currencies --- International monetary system --- Currency crises --- Informal sector --- Economics --- International finance --- China, People's Republic of