بررسی تاثیر سیاست‌های پولی بر ترکیب بهینه سبد دارایی بانک مرکزی

Investigating the impact of monetary policies on the optimal composition of the central bank's asset portfolio



Mahla Afsharpour

Seyed Abdolmajid Jalaei

Hossein Akbarifard

Mehdi Nejati

Abstract

Objective

Monetary policies are one of the key tools of the central bank in macroeconomic management, influencing economic variables such as interest rates, liquidity, and inflation. On the other hand, the composition of the central bank’s asset portfolio—including foreign exchange reserves, debt securities, gold, and other financial assets—is significantly affected by these policies. Understanding how monetary policies influence this composition can aid in formulating appropriate strategies to maintain economic stability and mitigate financial risks. This study aims to examine the impact of monetary policies on the optimal composition of the Central Bank of Iran’s asset portfolio over the period 1971–2023.

Methodology

To achieve this objective, an optimal control model was employed, utilizing the Particle Swarm Optimization (PSO) algorithm within the Spyder environment. Additionally, the sensitivity of the central bank’s asset portfolio to changes in interest rates, liquidity, and inflation was analyzed. The range of monetary policy variations was set between 0.5 (indicating a highly contractionary policy) and 1.5 (indicating a highly expansionary policy).

Findings and Discussion

The results indicate that monetary policies significantly affect the composition of the Central Bank of Iran’s asset portfolio. The key findings are as follows:

1. Interest Rates and Debt Securities: A decline in interest rates leads to an increase in the share of debt securities and a decrease in the share of foreign currencies within the central bank’s asset portfolio. This suggests that under expansionary monetary policies, the central bank is more inclined to control liquidity through domestic instruments such as debt securities.

2. Inflation and Safe-Haven Assets: Rising inflation rates lead to an increased share of safe-haven assets (such as gold and the Swiss franc) and a reduced share of currencies like the euro. This finding indicates that in inflationary conditions, the central bank prefers to hold more stable assets to preserve the value of its reserves.

3. Liquidity and Monetary Instability: An increase in monetary imbalances results in fluctuations in the asset portfolio, leading to a higher share of gold and debt securities. This reflects the central bank’s effort to manage monetary instability through diversified asset holdings.

4. Dependence on Foreign Currencies: While many central banks worldwide maintain a diversified mix of foreign currencies (such as the US dollar, euro, yen, and yuan), Iran’s reserves remain highly dependent on the US dollar and the euro. Some countries, such as China and Russia, have sought to reduce geopolitical risks by increasing the share of the yuan and the ruble in their reserves.

5. The Role of Gold in Reserves: Data from the International Monetary Fund (IMF) indicate that countries such as Germany, Russia, and China have significantly increased their gold reserves in recent years. This trend aligns with the findings of this study regarding the importance of gold in inflationary conditions and economic uncertainty.

Conclusion and Policy Recommendations

This study demonstrates that monetary policies have a significant impact on the composition of the Central Bank of Iran’s asset portfolio. During periods of high inflation, the share of safe-haven assets such as gold and the Swiss franc increases, while during expansionary monetary policy phases, the share of debt securities rises. Based on these findings, the following recommendations are proposed for optimizing the central bank’s asset portfolio:

1. Diversification of Foreign Exchange Reserves: The central bank should maintain a more diversified mix of foreign currencies and reduce reliance on the US dollar and the euro. Increasing the share of the Chinese yuan, Russian ruble, and Swiss franc could help mitigate exchange rate risks and enhance reserve stability.

2. Increasing Gold Reserves: Given the role of gold in preserving asset value during economic instability, the central bank should expand its gold reserves during periods of economic stability to ensure sufficient buffers during crises.

3. Liquidity Management through Debt Securities: To control inflation and liquidity, the central bank should optimize the use of debt securities. Issuing bonds at the right time and with appropriate interest rates can help reduce inflationary pressures.

4. Adjusting Interest Rate Policies: Interest rates should be adjusted to not only control inflation but also maintain optimal liquidity levels. In inflationary conditions, raising interest rates can help curb excess liquidity and control inflation, whereas in recessionary conditions, lowering rates can stimulate investment.

5. Reducing Monetary Imbalances: To prevent excessive fluctuations in the asset portfolio, the central bank should coordinate its monetary and fiscal policies effectively and implement measures to manage liquidity.

The findings of this research can assist the Central Bank of Iran in formulating optimal strategies for managing its asset portfolio, ultimately enhancing economic stability and reducing financial risks.