A New Framework to Estimate the Currency-Asset Portfolio of Foreign Exchange Reserves—An Application to China
Existing literature have estimated the currency portfolio of foreign exchange(FX)reserves,but have not explored the asset portfolio.We construct a currency-asset portfolio matrix of the nation's FX reserves and derive their dynamic evolution equation.Using Rolling and Averaging regression,we estimate the evolution of portfolio of China's FX reserve from 2004 to 2019,with four major currencies and three major assets in consideration.Our new framework and methodology help to improve current research defi-ciencies,assess country-specific financial risks and optimize nations'FX reserve management.
foreign exchange reservescurrency-asset portfoliorolling average regression
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