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ABSTRACT
This study investigates the determinants of gold holdings by advanced and emerging market economies for a sample spanning a twenty-eight-year period from 1990 to 2017, including the recent global financial crisis. The dataset is interpreted using panel regression analysis with gold reserves as a dependent variable after fixing the coefficients of the cointegrating relation . Some of the factors affecting gold reserves are differentiated in selected emerging market and advanced economies. While most of the significant factors are common to both groups, energy imports seem to be the distinguishing indicator among the advanced economies. Advanced economies are ranked using the results of the panel corrected standard errors (PCSE) fixed-effects model, whereas emerging market economy results are given according to random effects. This is strongly supported by an economic rationale to hold sizable reserves of gold especially during periods of “heightened uncertainty.”
Supplementary Material
Supplemental data for this article can be accessed on the publisher’s website.
Notes
1. The G7 countries are Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
2. Half the G20 countries (excluding G7 countries), listed as Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Korea, and Turkey.
3. Total reserves comprise holdings of monetary gold, special drawing rights, reserves of IMF members held by the IMF, and holdings of foreign exchange under the control of monetary authorities. The gold component of these reserves is valued at year-end (December 31) London prices. Data are in current US dollars (World Bank Indicators, http://data.worldbank.org/indicator/FI.RES. XGLD.CD).