Framework and Process for Strategic Asset Allocation in Central Bank Foreign Exchange Reserves Management

Abstract

Already prior to the international financial crisis, Strategic Asset Allocation (SAA) was a topic of growing interest to central banks. Increasing levels of reserves had shone a spotlight on central banks’ reserves management in general and on SAA in particular. The events of the international financial crisis have intensified the interest in SAA as the need for a disciplined approach to reserves management and a careful analysis of investments’ risk-return characteristics was highlighted.