Hitotsubashi Institute for Advanced Study


Accumulation of Foreign Currency Reserves and Risk-taking


We assess whether the accumulation of foreign currency reserves in the Asia-Pacific region may have unintended consequences in the form of increased private sector risk-taking. To do so we carry out a country-specific daily data event study analysis of the relationship between official announcements of reserves stocks and various proxy measures of risk-taking. Overall, our results suggest that reserves accumulation exerts no systematic influence on risk-taking.

Report No.: HIAS-E-89
Author(s): Rasmus Fatum(a), (b)
James Yetman(c)
Affiliation: (a) School of Business University of Alberta, Edmonton, Alberta, Canada T6G 2R6
(b) Hitotsubashi Institute for Advanced Study, Kunitachi, Tokyo 186-8601 Japan
(c) Bank of International Settlements, Representative Office for Asia and the Pacific, 78th Floor, TWO IFC, 8 Finance Street, Central, Hong Kong
Issued Date: September 2019
Keywords: Foreign exchange reserves, risk-taking, implied volatility, credit default swaps
JEL: F31, G15