Central banks resumed buying gold

Monthly central bank statistics

Central Bank Reserve Management Practices

 Insights into Public Asset Management from the Second RAMP Survey

Determinants of Currency Composition of Reserves: a Portfolio Theory Approach

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches—liquidity tranche and investment tranche—especially for those with adequate reserves. Incorporating reserve tranching, we have developed in this paper a central bank’s reserve portfolio choice model to analyze the determinants of the currency composition of reserves. In particular, we adopt the classical mean-variance framework for the investment tranche and the asset-liability framework for the liquidity tranche. Building on these frameworks, the roles of currency compositions in imports invoicing and short-term external debt, and risk and returns of reserve currencies can be quantified by our structural model—a key contribution of our paper given the absence of structural models in the literature. Finally, we estimate the potential paths of the share of RMB in reserves under different scenarios to shed light on its status as an international currency.

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Reserve Management Practices of Central Banks

Most central banks measure reserve adequacy in one way or another. They most frequently use the import coverage method followed by short-term external debt ratio, broad money ratio, and the IMF’s Assessing Reserve Adequacy (ARA) metric.                                                     

Full survey

Determinants of Currency Composition of Reserves

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches—liquidity tranche and investment tranche—especially for those with adequate reserves. Incorporating reserve tranching, this paper develops a central bank’s reserve portfolio choice model to analyze the determinants of the currency composition of reserves. 

The scars from the global financial crisis are still evident on public wealth a decade later (IMF)

IMF Fiscal Monitor

Both sides of the balance sheet are important. Governments should consider the effect of policies on assets and non-debt liabilities, in addition to debt. This also applies to risk management, where valuation changes can have large wealth effects. 

Applying the same stress test that the Federal Reserve applies to banks would reduce US public sector net worth.

Post crisis reflections on Central Bank Reserve Management

"Mechanistic reliance on credit ratings can lead to forced selling in stressed market conditions (thus making the stabilization task of other central banks more difficult) and unintentionally increase concentration risk in the remainder of the portfolio".

http://www.imf.org/en/Publications/WP/Issues/2018/02/16/Central-Bank-Reserve-Management-and-International-Financial-Stability-Some-Post-Crisis-45635