02046cas a2200253 a 4500 AALejournalIMF006552 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455201334 1018-5941 BD-DhAAL BD-DhAAL Pihlman, Jukka. Procyclicality in Central Bank Reserve Management : Evidence from the Crisis / Jukka Pihlman, Han Hoorn. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (27 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students A decade-long diversification of official reserves into riskier investments came to an abrupt end at the beginning of the global financial crisis, when many central bank reserve managers started to withdraw their deposits from the banking sector in an apparent flight to quality and safety. We estimate that reserve managers pulled around USD 500 billion of deposits and other investments from the banking sector. Although clearly not the main cause, this procyclical investment behavior is likely to have contributed to the funding problems of the banking sector, which required offsetting measures by other central banks such as the Federal Reserve and Eurosystem central banks. The behavior highlights a potential conflict between the reserve management and financial stability mandates of central banks. This paper analyzes reserve managers' actions during the crisis and draws some lessons for strategic asset allocation of reserves going forward. Mode of access: Internet Hoorn, Han. IMF Working Papers; Working Paper ; No. 2010/150 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/150/001.2010.issue-150-en.xml IMF e-Library