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What are Foreign Exchange Reserves

Foreign Exchange Reserves:-

Foreign-exchange reserves (also called forex reserves or FX reserves) in a strict sense are ‘only’ the foreign currency deposits and bonds held by central banks and monetary authorities. However, the term in popular usage commonly includes foreign exchange and gold, special drawing rights (SDRs), and International Monetary Fund (IMF) reserve positions. Crowding Out:-The possible tendency for government spending on goods and services to put upward pressure on interest rates, thereby discouraging private investment spending.

It  includes foreign bank notes ,short and long terms foreign securities,foreign bank deposits,foreign treasury bills.

They are called reserve assets. in the balance of payment and are located in the capital has important part in the international investment position of an nation.

In central bank balance sheet they are shown on the asset side of the balance sheet along with domestic credit.

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