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Definition of 'Monetary Reserve'
A nation's assets held in a foreign currency and/or commodities like gold and silver. Monetary reserves are used to back up the national currency and to provide a cushion for executing central banking functions like adding to the money supply and settling foreign exchange contracts in local currencies.
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Investopedia explains 'Monetary Reserve'
When the United States was using the Bretton Woods inspired monetary system, only gold was used as a monetary reserve, a structural problem that most saw as a roadblock to future economic growth. The U.S. dollar is now a fiat currency (not pegged to gold reserves), and even though the Federal Reserve Banks keep a large amount of reserves, most of what is held today is used for settling short-term currency contracts and for liquidity activities for the domestic economy.
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Take a look at the tenets, assumptions and challenges of monetarism's principal theory.
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Baffled by exchange rates? Wonder why some currencies fluctuate while others are pegged? This article has the answers.
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Think the value of gold is unshakable? Read this chronicle of its rise and fall.
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