Time to evolve

A quarter century of FX reserve management. The past 25 years has witnessed central banks employ a policy of significantly increasing their foreign exchange reserves. We ask why and what the future holds for policy decisions.

After a dramatic rise in foreign exchange (FX) reserves held by central banks over the last two decades, many countries now find themselves with a level of reserves well above that considered adequate to support monetary and exchange rate policies. In this extensive paper, we consider what this means for policy decisions today and in the future.