A Joint Foreign Currency Risk Management Approach for Sovereign Assets and Liabilities

Cangoz, M. Coskun ; Sulla, Olga ; Wang, Chun Lan ; Dychala, Christopher

World Bank, Washington, DC

关键词: EXCHANGE RATE RISK;    ASSET AND LIABILITY MANAGEMENT;    PUBLIC DEBT;    SOVEREIGN DEBT MANAGEMENT;    SOVEREIGN ASSETS;   

DOI  :  10.1596/1813-9450-8728
RP-ID  :  WPS8728

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

An asset and liability managementframework for managing risks arising from sovereign foreignexchange obligations requires a joint analysis of (i) theexternal financial liabilities resulting from acountry's sovereign debt and (ii) the foreign exchangeassets of its central bank. Governments often issue sizableamounts of debt denominated in foreign currencies,subjecting their fiscal positions to foreign exchangevolatilities. Prudent management of a sovereign’s foreignexchange position under an asset and liability managementframework enables governments to mitigate risks at thelowest possible cost, hence increasing resilience toexternal shocks. Based on the challenges associated with theimplementation of an asset and liability managementframework, this study recommends a practical approach thatincludes analysis of the foreign exchange positions ofcentral bank reserves and central government debt portfoliosand optimization of the net position. The proposed model istested, using the foreign exchange reserve and external debtdata of seven countries (Albania, Ghana, FYR Macedonia,South Africa, the Republic of Korea, Tunisia, and Uruguay).The paper employs quantitative methods to explore the impactof an overarching asset and liability management strategyand integrated approach on the efficient management offoreign exchange risk. It provides policy recommendations onways to minimize the risk of foreign exchange mismatches andincrease the return on foreign exchange reserves.