• Viktor Koziuk West Ukrainian National University, Ternopil, Ukraine



gold, currency reserves, central banks, geopolitical risks, reserve diversification, military expenditures


Gold holdings increased during recent time. Geopolitical factors could be responsible for such shift taking into account rising number of conflicts in the world since 2014. However, optimal share for gold in external assets is still disputable. The paper provides empirical tests to identify political economy factors of central bank’s gold holdings. The paper imply two empirical approaches: analysis of how gold reserves in tones and as a share of reserves distributed among the countries with different political regimes; logit regression to identify role of political economy factors that may push countries’ switch to gold. Results of empirical analysis shows that political regime itself is not obvious driving force of gold share. Excluding developed countries, it is possible to see that autocracies do not outperform democracies in terms of mean and median share of gold systematically. Countries demonstrated shifts toward gold early then reference point of 2014 year despite political regime. Logit regression also helps to see that countries heavily have being exposing to gold are more likely hoarding large exchange reserves and politically stable. Proxies of geopolitical aggressiveness are valid with some covenants. While Global Peace Index is well proxy to identify geopolitical preconditions of countries’ switch to gold, military expenditures are not. This means that geopolitical motives of gold hoarding probably work directly and indirectly through exchange reserves accumulation and supportive political stability. Geopolitical aggressiveness that coincides with only large military expenditures but not with reserves accumulation is likely to stand on weak economic ground.

Author Biography

Viktor Koziuk, West Ukrainian National University, Ternopil, Ukraine




Abduloev, I., Epstein, G., Gang, I. (2020). A Downside to the Brain Gain Story. ECONOMICS-Innovative and Economics Research Journal, 8(2),9-20.

Agemoglu, D., Yared, P. (2010). Political Limits to Globalization. American Economic Review, 100(2),83-88.

Aizenman, J., Inoue, K. (2012). Central Banks and Gold Puzzles. NBER Working Paper, 17894, 1-44.

Aizenman, J., Marion, N. (2004). International Reserve Holding with Sovereign Risk and Costly Tax Collection. Economic Journal, 17, 370-400.

Arslanalp, S., Eichengreen, B., Simpson-Bell, Ch. (2022).The Stealth Erosion of Dollar Dominance: Active Diversifiers and the Rise of Non traditional Reserve Currencies. IMF Working Paper, WP/22/58, 1-42.

Arslanalp, S., Eichengreen, B., Simpson-Bell, Ch. (2023). Gold as International Reserves: Barbarius Relic No More? IMF Working Paper, WP/23/14, 1-37.

Baur, D. G., & Lucey, B. M. (2010). Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold. Financial Review, 45(2), 217-229.

Baur, D., Smiles, L. (2020). Hedging Geopolitical Risks with Precious Metals. Journal of Banking & Finance, 117(C). /j.jbankfin.2020.105823

Baur, D.G., McDermott, T.K. (2010). Is gold a safe haven? International evidence. Journal of Banking & Finance, 34, 1886-1898.

Beck, R., Weber, S. (2010). Should Larger reserve Holding Be More Diversified? ECB Working Paper. 1193, 1-48.

Beckmann, J., Berger, T.,& Czudaj, R. (2015). Does gold act as a hedge or a safe haven for stocks? A smooth transition approach. Economic Modelling, 48(C), 16-24.

Dreher, A., Vaubel, R. (2009). Foreign Exchange Reserves and the Political Business Cycle: A Panel Data Analysis. Journal of International Money and Finance, 28(5), 755-775.

Eichengreen, B., Mehl, A., Chitu, L. (2017). Mars or Mercury? The Geopolitics of International Currency Choice. NBER Working Paper, 24145, 1-49.

Emmrich, O., & McGroarty, F. J. (2013). Should gold be included in institutional investment portfolios? Applied Financial Economics, 23(19), 1553–1565.

Fabris N. (2022). Impact of COVID-19 Pandemic on Financial Innovation, Cashless Society, and Cyber Risk. ECONOMICS- Innovative and Economics Research Journal, 10(1), 73-86.

Fabris, N., Jesic, M. (2023). Are Gold and Bitcoin a Safe Haven for European Indices? Journal of Central Banking Theory and Practice, 12(1), 27-44.

Ghosh, A. (2016). Determinants of Gold Demanding Reserve Bank of India’s foreign exchange. Economics Bulletin, 36(4), 1929–1937.

Gold Reserves in Central Banks – 2020 Survey Results. (2020). Gold for Central Banking 2020. Central Banking Focus Report, 54-63. Gopalakrishnan, B.,& Mohapatra, S. (2017). Global risk and demand for gold by central banks. Applied Economics Letters, 25(12),835-839.

Gürgün, G., Ünalmis, I.(2014). Is gold a safe haven against equity market investment in emerging and developing countries? Finance Research Letters, 11(4), 341-348.

Iaccurci G. (2021). Gold as an inflation Hedge? History Suggests Otherwise.

Jager, K. (2016). The Role of Regime Type in the Political Economy of Foreign Reserves Accumulation. European Journal of Political Economy, 44, 79-96.

Joahim K. (2015). Facts and Fantasies about Gold. Published in: Facts and Fantasies about Gold , 1(1), 1-12.

Koziuk, V. (2021)b. Gold Prices: Does Geopolitical Tensions Really Matter? World of Finance, 2(67), 8-22.

Koziuk, V. (2021)c. Role of Gold in Foreign Exchange Reserves of Commodity Exporting Countries. Journal of European Economy, 20 (2), 211-232.

Koziuk, V. (2021)а. Does Political Regime Matter for Abnormal Hoarding of International Exchange Reserves? Journal of International Studies, 14 (2), 208-227.

Koziuk, V. (2022)a. Drivers of Gold Fraction in Global Exchange Reserves. Journal of European Economy, 21(2),137-153.

Koziuk, V. (2022)b. Central Bank’s Reserves: Is Gold a ”safe haven” in case of geopolitical turmoil? Vox Ukraine.

Leblang, D., Pepinsky, Th. (2008). To Have or to Hoard? The Political Economy of International Reserves. Paper Presented at the 2008 Annual Meetings of the American Political Science Association, Boston, M.A.

Mastilo Z., Bozovic N., Mastilo D. (2021). Central Bank in the Development of the National Economy of the Bosnia and Gercegovina. International Letters of Social and Humanistic Sciences, 90, 26-36.

Moghadam Bahrami, S., Bahernia, N. (2021). The political economy of gold in geo-economic evolving conditions. Geopolitics Quarterly, 16(60), 209-233.

O’Connor, F., Lucey, B., Batten, J., Baur, D. (2015). The Financial Economics of Gold – A Survey. International Review of Financial Analysis, 41, 186-205.

Oktay, B., Öztunç, H., &Serİn, Z. V. (2016). Determinants of Gold Reserves : An Empirical Analysis for G-7 Countries. Procedia Economics and Finance, 38, 8-16.

Qin, M., Su, Chi.-W., Qi, Xi-Zh., Hao, L.-N. (2020). Should Gold Be Stored in Chaotic Eras? Economic Research, 33 (1), 224-242.

Reboredo, J. (2013)b. Is gold a hedge or safe haven against oil price movements? Resources Policy, 38(2), 130-137.

Reboredo, J. (2013)а. Is Gold a Safe Haven or a Hedge for the US Dollar? Implications for Risk Management. Journal of Banking and Finance, 37(8), 2665-2676.

Son, B. (2020). Democracy and Reserves. Foreign Policy Analysis,16(3), 417-437.

Sousa Barros, T. (2020). Central Bank’s Gold Reserve: Hedge or Weapon?(No. 152418066) [Doctoral dissertation, Universedada Catolica Portuguese]. Repositório Institucional da Universidade Católica Portuguesa, 1-50.

Szayna, Th., O’Mahony, A., Kavanagh, J., Watts, S.,Frederick, B., Norlen, T., Voorhies, Ph. (2017). Conflict Trends and Conflict Drivers: An Empirical Assessment of Historical Conflict Patterns and Future Conflict Projections. Rand Corporation. Santa Monica. California, 286.

Zulaica, O. (2020). What Share for Gold? On the Interaction of Gold and Foreign Exchange Reserve Returns. BIS Working Paper, 906, 1-30.




How to Cite