Official Reserves

Official reserves (3/13)

•the foreign currency holdings of the U.S. federal reserve system

•when there is a balance of payments surplus the Fed accumulates foreign currency and debits the balance of payments. 

•when there is a balance of payments deficit the Fed depletes its reserves of foreign currency and credits the balance of payments. 

•the official reserves zero out the balance of payments. 

•Active official reserves Vs. Passive 

- the U.S. is passive in its use of official reserves. It does not seek to manipulate the dollar exchange rate. 

- the people's republic of china is active in its use of official reserves. It actively buys and sells dollars in order to maintain a steady exchange with U.S.