Chapter 12 Official Settlements Balance

Chapter 12 Official Settlements Balance - and foreign bank...

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Official Settlements Balance o Represents transactions in the official reserves that are  held by the central bank o In theory the balance of payments must always balance o One set of capital account transactions is transactions in official reserve assets o These transactions differ from other capital account transactions because they are  conducted by central banks o Official reserve assets are assets other than domestic money or securities that can  be used in making international payments o Official reserves include government securities of major industrialized economies 
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Unformatted text preview: and foreign bank deposits o Central banks can change the quantity of official reserve assets by buying or selling reserve assets on open markets o If the Bank of Canada wants to increase its holdings of reserve assets it will sell dollars to buy foreign assets o If the Bank of Canada wants to decrease its holdings of reserve assets it will sell foreign assets to buy dollars...
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This note was uploaded on 10/21/2010 for the course ECON 102 taught by Professor ? during the Fall '08 term at Waterloo.

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