Central Banks and Gold Puzzles

Joshua Aizenman and Kenta Inoue

No 17894, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the curious patterns of gold holding and trading by central banks during 1979-2010. With the exception of several discrete step adjustments, central banks keep maintaining passive stocks of gold, independently of the patterns of the real price of gold. We also observe the synchronization of gold sales by central banks, as most reduced their positions in tandem, and their tendency to report international reserves valuation excluding gold positions. Our analysis suggests that the intensity of holding gold is correlated with 'global power' - by the history of being a past empire, or by the sheer size of a country, especially by countries that are or were the suppliers of key currencies. These results are consistent with the view that central bank's gold position signals economic might, and that gold retains the stature of a 'safe haven' asset at times of global turbulence. The under-reporting of gold positions in the international reserve/GDP statistics is consistent with loss aversion, wishing to maintain a sizeable gold position, while minimizing the criticism that may occur at a time when the price of gold declines.

JEL-codes: E58 F31 F33 (search for similar items in EconPapers)
Date: 2012-03
New Economics Papers: this item is included in nep-ifn, nep-mac, nep-mon and nep-opm
Note: IFM ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Aizenman, Joshua & Inoue, Kenta, 2013. "Central banks and gold puzzles," Journal of the Japanese and International Economies, Elsevier, vol. 28(C), pages 69-90.

Downloads: (external link)
http://www.nber.org/papers/w17894.pdf (application/pdf)

Related works:
Journal Article: Central banks and gold puzzles (2013)
Working Paper: Central Banks and Gold Puzzles (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:17894

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17894

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().