What drives gold demand in central bank's foreign exchange reserve portfolio?

Amit Ghosh

Finance Research Letters, 2016, vol. 17, issue C, 146-150

Abstract: This study examines the determinants of gold demand in central bank's foreign exchange reserves portfolio by using a panel data set of over 100 nations for 1998–2014. I find gold's US dollar and inflation-hedge properties as well as higher exchange rate risk and monetary policy instability to significantly increase central bank's gold holdings while higher economic growth and financial development to reduce such share. Moreover, the recent global financial crisis caused central banks to increase this share. The results imply the rationale for holding gold in central banks’ reserves is actually not different than hedge fund managers or individual investors.

Keywords: Foreign exchange reserve portfolio; Gold's share; GMM-estimations; Inflation hedge; Currency risks; Monetary policy instability (search for similar items in EconPapers)
JEL-codes: E58 F31 G15 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:17:y:2016:i:c:p:146-150

DOI: 10.1016/j.frl.2016.03.007

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