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Central Bank Governance and Reserve Portfolios Investment Policies: An Empirical Analysis

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dc.contributor.authorKlingebiel, Daniela
dc.contributor.authorHerrero Montes, Carmen Mileva
dc.contributor.authorRuiz, Marco
dc.contributor.authorSeward, James
dc.date.accessioned2021-09-02T16:09:51Z
dc.date.available2021-09-02T16:09:51Z
dc.date.issued2021-08
dc.description.abstractThis paper uses a unique survey data set of 105 central banks to investigate whether investment policies for central bank foreign reserve portfolios are linked to the governance arrangements for reserve management. The paper evaluates whether a central bank's investment decision-making structure impacts how much risk institutions take in their reserve management operations and the level of diversity in their reserve portfolios. Additionally, it explores the implications of the broader governance environment on reserve management. The analysis yields four key findings. First, internal governance arrangements matter for foreign reserve portfolio investment policy; the empirical results indicate that reserve portfolios are more diversified in central banks in which the middle office directly reports to the board. Second, controlling for the level of reserves, the macroenvironment, and the broader governance environment, reserve portfolios are more diversified in central banks where the back, middle, and front offices are separated. Third, the regression analysis also reveals that central banks in countries where the Ministry of Finance has an obligation to cover negative equity have fewer eligible currencies and are therefore less diversified. Fourth, central banks where boards actively exercise portfolio oversight usually have portfolios with more risk and diversification. Portfolios with longer investment horizons, more currencies, and a broader set of asset classes have performed better historically while limiting downside risk. Given that the analysis controls the broader governance environment, the data indicate that any central bank can improve its internal governance regardless of the external governance environment. This paper contributes to the literature on central bank foreign reserves management and on understanding the importance of governance arrangements in investment policy.en
dc.identifierhttp://documents.worldbank.org/curated/undefined/953891630350698523/Central-Bank-Governance-and-Reserve-Portfolios-Investment-Policies-An-Empirical-Analysis
dc.identifier.doi10.1596/1813-9450-9763
dc.identifier.urihttps://hdl.handle.net/10986/36228
dc.languageEnglish
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper;No. 9763
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.subjectCENTRAL BANK
dc.subjectRISK TOLERANCE
dc.subjectRESERVE MANAGEMENT POLICY
dc.subjectCENTRAL BANK GOVERNANCE
dc.subjectPUBLIC INVESTMENT MANAGEMENT
dc.titleCentral Bank Governance and Reserve Portfolios Investment Policiesen
dc.title.subtitleAn Empirical Analysisen
dc.typeWorking Paperen
dc.typeDocument de travailfr
dc.typeDocumento de trabajoes
dspace.entity.typePublication
okr.crossref.titleCentral Bank Governance and Reserve Portfolios Investment Policies: An Empirical Analysis
okr.date.disclosure2021-08-30
okr.date.doiregistration2025-04-10T09:20:26.063038Z
okr.date.lastmodified2021-08-30T00:00:00Zen
okr.doctypePublications & Research
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://documents.worldbank.org/curated/undefined/953891630350698523/Central-Bank-Governance-and-Reserve-Portfolios-Investment-Policies-An-Empirical-Analysis
okr.guid953891630350698523
okr.identifier.doi10.1596/1813-9450-9763
okr.identifier.externaldocumentum090224b088923042_1_0
okr.identifier.internaldocumentum33376707
okr.identifier.reportWPS9763
okr.importedtrueen
okr.language.supporteden
okr.pdfurlhttp://documents.worldbank.org/curated/en/953891630350698523/pdf/Central-Bank-Governance-and-Reserve-Portfolios-Investment-Policies-An-Empirical-Analysis.pdfen
okr.topicPublic Sector Development::Public Investment Management
okr.topicFinance and Financial Sector Development::Financial Crisis Management & Restructuring
okr.topicFinance and Financial Sector Development::Financial Structures
okr.topicFinance and Financial Sector Development::Strategic Debt Management
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.unitTreasury Asset Management and Advisory Department; and Capital Markets and Investments Department
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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