Monetary Reserve

AAA

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.

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.

RELATED TERMS
  1. Fiat Money

    Currency that a government has declared to be legal tender, but ...
  2. Monetary Control Act

    Title 1 of a two-title act passed in 1980 that represented the ...
  3. Adjustment Credit

    A short-term loan made by a Federal Reserve Bank to a smaller ...
  4. Gold Standard

    A monetary system in which a country's government allows its ...
  5. Monetary Policy

    The actions of a central bank, currency board or other regulatory ...
  6. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
Related Articles
  1. Currency Exchange: Floating Rate Vs. ...
    Forex Education

    Currency Exchange: Floating Rate Vs. ...

  2. The Gold Standard Revisited
    Budgeting

    The Gold Standard Revisited

  3. What Is the Quantity Theory of Money?
    Fundamental Analysis

    What Is the Quantity Theory of Money?

  4. How Influential Economists Changed Our ...
    Fundamental Analysis

    How Influential Economists Changed Our ...

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center