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

Authors

  • M. Coskun Cangoz The World Bank
  • Olga Sulla The World Bank
  • Chun Lan Wang The World Bank
  • Christopher Dychala The World Bank

DOI:

https://doi.org/10.33423/jabe.v22i10.3719

Keywords:

Business, Economics, exchange rate risk, asset and liability management, public debt, sovereign balance sheet, macro hedging, portfolio optimization, international reserves, strategic asset allocation

Abstract

A sovereign asset and liability management framework for managing foreign currency risk requires a joint analysis of (i) the external financial liabilities resulting from a country’s sovereign debt and (ii) the foreign exchange assets of its central bank. The study recommends a practical approach that includes analysis of the foreign exchange positions of central bank reserves and central government debt portfolios and optimization of the net position. A quantitative method is employed for efficient management of foreign exchange risk. The model is tested for seven countries (Albania, Ghana, North Macedonia, South Africa, the Republic of Korea, Tunisia, and Uruguay).

Downloads

Published

2020-12-12

How to Cite

Cangoz, M. C., Sulla, O., Wang, C. L., & Dychala, C. (2020). A Joint Foreign Currency Risk Management Approach for Sovereign Assets and Liabilities. Journal of Applied Business and Economics, 22(10). https://doi.org/10.33423/jabe.v22i10.3719

Issue

Section

Articles