Sterilization, Monetary Policy, and Global Financial Integration


Joshua Aizenman

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2008-15 | August 1, 2008

This paper investigates the changing pattern and efficacy of sterilization within emerging market countries as they liberalize markets and integrate with the world economy. We estimate the marginal propensity to sterilize foreign asset accumulation associated with net balance of payments inflows, across countries and over time. We find that the extent of sterilization of foreign reserve inflows has risen in recent years to varying degrees in Asia as well as in Latin America, consistent with greater concerns about the potential inflationary impact of reserve inflows. We also find that sterilization depends on the composition of balance of payments inflows.

Article Citation

Aizenman, Joshua, and Reuven Glick. 2008. “Sterilization, Monetary Policy, and Global Financial Integration,” Federal Reserve Bank of San Francisco Working Paper 2008-15. Available at

About the Author
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Reuven Glick is a group vice president in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Reuven Glick