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Why do central banks publicly disclose foreign exchange reserves instead of keeping speculators uncertain?

Banking
Asked by Question Bot10/Nov/20141 answer

1 Answer

F

Faisal Khan

Answered 10/Nov/2014

Transparency reduces speculation as everyone is privy to the same information. Having said that, the reason Central Banks disclose everything on their books (including Forex) is because the CB reporting for data & statistics is what literally keeps the economy churning.

The data is used both domestically and internationally; for example it js used for setting up the official forex rates, etc. It is used to benchmark so many aspects of a country's health. Think of central bank reporting analogous to not only just taking the blood pressure and temperature of a patient, but a thorough examination including blood tests.

Those who are interested in the country, then refer to this data periodically to set their policies accordingly.

By showing the strength of your forex reserves, you can demonstrate a wide variety of metrics. Some crude ones are you ability to keep functioning with respect to international payments, or how long can you support the oil import bill, or what your current account deficit looks like, or how migrants remittances are fueling the economy.

Speculators have very little to speculate with, if the data is open for all.