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Despite major structural shifts in the international monetary system over the past six decades, the US dollar remains the dominant international reserve currency. Using a newly compiled database of individual economies’ reserve holdings by currency, this paper finds that financial links have been an increasingly important driver of reserve currency configurations since the global financial crisis, particularly for emerging market and developing economies. The paper also finds a rise in inertial effects, implying that the US dollar dominance is likely to endure. But historical precedents of sudden changes suggest that new developments, such as the emergence of digital currencies and new payments ecosystems, could accelerate the transition to a new landscape of reserve currencies.

Recent events have shown that sovereigns, just like banks, can be subject to runs, highlighting the importance of the investor base for their liabilities. This paper proposes a methodology for compiling internationally comparable estimates of investor holdings of sovereign debt. Based on this methodology, it introduces a dataset for 24 major advanced economies that can be used to track US$42 trillion of sovereign debt holdings on a quarterly basis over 2004-11. While recent outflows from euro periphery countries have received wide attention, most sovereign borrowers have continued to increase reliance on foreign investors. This may have helped reduce borrowing costs, but it can imply higher refinancing risks going forward. Meanwhile, advanced economy banks' exposure to their own government debt has begun to increase across the board after the global financial crisis, strengthening sovereign-bank linkages. In light of these risks, the paper proposes a framework-sovereign funding shock scenarios (FSS)-to conduct forward-looking analysis to assess sovereigns' vulnerability to sudden investor outflows, which can be used along with standard debt sustainability analyses (DSA). It also introduces two risk indices-investor base risk index (IRI) and foreign investor position index (FIPI)-to assess sovereigns' vulnerability to shifts in investor behavior.

We present a comprehensive analysis of the shock absorption role of external positions using the currency exposures dataset by Bénétrix et al. (2020). While the literature has frequently studied how the net international investment position and its currency composition determine the direction and scale of valuation effects, we focus on their amplitude. This is of central importance for global financial stability given the large and increasing scale of external balance sheets. To that end, we propose an indicator showing the extent to which external positions absorb or amplify exchange rate shocks. Analysing a set of 50 countries over the period 1990-2017, we find the external shock absorption role to be present for advanced economies, while this was initially not the case for emerging markets economies (EMEs). In recent years, however, EMEs’ external positions increasingly showed a shock absorption capacity. Our regression-based analysis reveals that the level of economic and financial development is associated with a greater capacity to absorb exchange rate shocks.

The Little Data Book on Financial Development 2014 is a pocket edition of the Global Financial Development Database, published as part of the work on the Global Financial Development Report 2014: Financial Inclusion. It contains 38 indicators of financial development in 205 economies, including measures of (1) financial depth, (2) access, (3) efficiency, and (4) stability of financial institutions and markets. Additional variables, historical observations, and links to underlying research are available at www.worldbank.org/financialdevelopment.

The little data book on financial development 2013 is a pocket edition of the global financial development database published as part of the work on the global financial development report 2013: rethinking the role of the state in finance. The global financial development database is an extensive dataset of financial system characteristics for 203 economies. The database includes measures of (1) size of financial institutions and markets (financial depth), (2) degree to which individuals can and do use financial services (access), (3) efficiency of financial intermediaries and markets in intermediating resources and facilitating financial transactions (efficiency), and (4) stability of financial institutions and markets (stability). There is ample evidence on the role financial sector development plays in economic development, poverty alleviation and economic stability. However there are serious shortcomings associated with measuring the concept of the 'functioning of the financial system.' Recognizing the need for good data to better understand the concept of financial development, the World Bank's financial and private sector Vice Presidency and development economics Vice Presidency have recently launched a global financial development database, an extensive worldwide database that combines and updates several financial data sets. The data highlight the multi-dimensional nature of financial systems. Deep financial systems do not necessarily provide high degrees of financial access; highly efficient financial systems are not necessarily more stable than the less efficient ones, and so on. Each of these characteristics has an association with aspects of the broader socio-economic development, and each is, in turn, strongly associated with financial sector policies and other parts of the enabling environment for finance. The data also demonstrate the effects of the global financial crisis. The crisis not only increased financial instability but also translated into difficulties along other dimensions, such as increasing problems of access to financial services.

To estimate the currency composition of China's foreign exchange reserves and assess its effectiveness of management, the constrained least square method and variance sensitive analysis are utilized, respectively. Based on portfolio accounting identities, the change of foreign exchange reserves was decomposed into the net purchase change and the non-purchase change. The newly constructed non-purchase change was used to estimate the latent currency composition. Empirical results show that by the end of 2015Q1, China held about 63.6% of its reserves in the U.S. dollar, 19.6% in the euro, 3.09% in the Japanese yen, 4.89% in the pound sterling, 2.22% in the Canadian dollar, 2.03% in the Australian dollar, and 0.09% in the Swiss franc. Although the currency composition kept relatively stable, more attention had been paid to the emerging international currencies. China decreased the U.S. dollar share during the subprime crisis, while resorted to the portfolio rebalance strategy since 2011. The euro share and the pound sterling share declined during the European sovereign debt crisis. The first derivative of the U.S. dollar was positive while those of other currencies were negative before 2014Q3, and vice versa after 2014Q4. In general, the currency composition management of China's foreign exchange reserves was effective.

The IMF Research Bulletin, a quarterly publication, selectively summarizes research and analytical work done by various departments at the IMF, and also provides a listing of research documents and other research-related activities, including conferences and seminars. The Bulletin is intended to serve as a summary guide to research done at the IMF on various topics, and to provide a better perspective on the analytical underpinnings of the IMF's operational work.

The Little Data Book on Financial Development 2015/2016 is a pocket edition of the Global Financial Development Database, published as part of the work on the Global Financial Development Report 2015/2016: Long-Term Finance. It contains 39 indicators of financial development in 202 economies, including measures of (1) financial depth, (2) access, (3) efficiency, and (4) stability of financial institutions and markets.