Change of reserves:
An increase in foreign assets held by the central bank is recorded with a positive or a negative sign for the change of reserves?
good question. While I'm not positive, I believe holding foreign assets increases a bank's reserves. (It certainly increases its foreign reserves).
check this site:
http://www.answers.com/topic/foreign-exchange-reserves
that's what i don't get, if you increase foreign assets, it means you pay out money right? Would the reserves decrease?
An increase in foreign assets held by the central bank is recorded with a positive sign for the change of reserves.
To understand the reasoning behind this, it's necessary to have some background knowledge about accounting principles and the balance of payments.
The change in reserves refers to the variation in a country's official reserves held by its central bank. These reserves usually consist of foreign currency and other assets, such as gold or special drawing rights (SDRs).
In accounting, there are two types of accounts: assets and liabilities. Assets are recorded with a positive sign, while liabilities are recorded with a negative sign. Reserves are considered assets for the central bank, and any increase in the amount of reserves is recorded as a positive change.
When a central bank acquires foreign assets, such as by purchasing foreign currency or receiving it from other parties, it increases its reserves. Therefore, the change in reserves is positive because it represents a growth in the central bank's asset position.
Conversely, a decrease in reserves, such as when the central bank sells foreign assets or provides foreign currency to other parties, would be recorded as a negative change in reserves because it represents a reduction in the central bank's asset position.
It's important to note that these accounting conventions may vary in some cases, but the general principle of recording increases in reserves as positive changes is widely followed.