Vinokurov E., Grichik M. (2022) New concept of international reserve assets: Security, diversification and nonconventional approaches. Voprosy Ekonomiki, 12:24-43. (In Russian)

16 January 2023 

The freezing of Russia’s international reserve assets, the world’s seventh largest, despite not being the first case of its kind, will have systemic impact on the way countries around the world treat their reserves. Financial sanctions have undermined confidence in traditional reserve currencies. A systemic and complete revision of the conceptual approaches to managing international reserve assets is due. The current framework of the international financial system does not offer any off-the-shelf solutions to enable safeguarding the integrity of reserves and maintaining macroeconomic stability. The paper proposes potential new approaches to the safety of reserve assets. It could be implemented through the diversification of instruments and operators. The paper examines several possible solutions that might complement/replace reserves in traditional reserve currencies, ranging from compromise solutions to unconventional ones: (1) expanding the use of existing tools which carry less risk, (2) introducing new instruments, and (3) changing the paradigm. The authors conclude that the resulting system will be more volatile, decentralized, complicated and expensive to manage. However, this is the price many countries would be willing to pay for the security of their reserves.

Keywords: foreign exchange reserves, IMF, macroeconomic stability, global financial stability, reserve currency

JEL: F02, F32, F33, F42, G15, H63