Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries

Paul Atanda Orebiyi; Mmeyene-Abasi Essien Archibong

doi:doi:10.11648/j.jwer.20221101.14

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Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries

Paul Atanda Orebiyi, Mmeyene-Abasi Essien Archibong

Published in Journal of World Economic Research (Volume 11, Issue 1)

Received: 19 July 2021 Accepted: 2 August 2021 Published: 19 February 2022

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Abstract

Over the years, gold has showed some promises in performing the role of value preservation for the holders and as a result helping countries in stabilizing their reserves. For this reason, several countries still maintain part of their reserves in gold, even though gold was officially de-pegged from countries’ currencies after the collapse of the Bretton woods system. In this study, we employed panel data regression model to examine the determinants of demand for gold by countries. The result showed a positive relationship between the demand for gold and the price of gold, exchange rate, foreign direct investment, and private credit to GDP. It revealed that trade openness and inflation rate had a negative relationship with the demand for gold. Also, it was revealed that the price of gold had a positive relationship with Nigeria’s total reserves both in the short run and in the long run. On the other hand, while exchange rate had a positive relationship with Nigeria’s total reserves in the short run it exerts a negative relationship in the long run. Also trade openness and GDP growth rate had a negative relationship with Nigeria’s total reserves both in the short-run and in the long run. But inflation rate had a negative relationship with Nigeria’s total reserves in the long run. Based on these findings, the study recommends that Nigerian government should adopt a pro-active measure in strengthening and enhancing the total reserve base of the economy by including gold as a safe and hedging asset in the reserve portfolio, thereby enhancing the performance and resilience of our total reserves in the face of economic and financial downturns.

Published in	Journal of World Economic Research (Volume 11, Issue 1)
DOI	10.11648/j.jwer.20221101.14
Page(s)	27-44
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2022. Published by Science Publishing Group

Keywords

Gold Reserves, Demand for Gold, External Reserves, Price, Exchange Rate

References

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Paul Atanda Orebiyi, Mmeyene-Abasi Essien Archibong. (2022). Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries. Journal of World Economic Research, 11(1), 27-44. https://doi.org/10.11648/j.jwer.20221101.14

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ACS Style

Paul Atanda Orebiyi; Mmeyene-Abasi Essien Archibong. Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries. J. World Econ. Res. 2022, 11(1), 27-44. doi: 10.11648/j.jwer.20221101.14

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Paul Atanda Orebiyi, Mmeyene-Abasi Essien Archibong. Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries. J World Econ Res. 2022;11(1):27-44. doi: 10.11648/j.jwer.20221101.14

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@article{10.11648/j.jwer.20221101.14,
  author = {Paul Atanda Orebiyi and Mmeyene-Abasi Essien Archibong},
  title = {Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries},
  journal = {Journal of World Economic Research},
  volume = {11},
  number = {1},
  pages = {27-44},
  doi = {10.11648/j.jwer.20221101.14},
  url = {https://doi.org/10.11648/j.jwer.20221101.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20221101.14},
  abstract = {Over the years, gold has showed some promises in performing the role of value preservation for the holders and as a result helping countries in stabilizing their reserves. For this reason, several countries still maintain part of their reserves in gold, even though gold was officially de-pegged from countries’ currencies after the collapse of the Bretton woods system. In this study, we employed panel data regression model to examine the determinants of demand for gold by countries. The result showed a positive relationship between the demand for gold and the price of gold, exchange rate, foreign direct investment, and private credit to GDP. It revealed that trade openness and inflation rate had a negative relationship with the demand for gold. Also, it was revealed that the price of gold had a positive relationship with Nigeria’s total reserves both in the short run and in the long run. On the other hand, while exchange rate had a positive relationship with Nigeria’s total reserves in the short run it exerts a negative relationship in the long run. Also trade openness and GDP growth rate had a negative relationship with Nigeria’s total reserves both in the short-run and in the long run. But inflation rate had a negative relationship with Nigeria’s total reserves in the long run. Based on these findings, the study recommends that Nigerian government should adopt a pro-active measure in strengthening and enhancing the total reserve base of the economy by including gold as a safe and hedging asset in the reserve portfolio, thereby enhancing the performance and resilience of our total reserves in the face of economic and financial downturns.},
 year = {2022}
}

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TY  - JOUR
T1  - Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries
AU  - Paul Atanda Orebiyi
AU  - Mmeyene-Abasi Essien Archibong
Y1  - 2022/02/19
PY  - 2022
N1  - https://doi.org/10.11648/j.jwer.20221101.14
DO  - 10.11648/j.jwer.20221101.14
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 27
EP  - 44
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20221101.14
AB  - Over the years, gold has showed some promises in performing the role of value preservation for the holders and as a result helping countries in stabilizing their reserves. For this reason, several countries still maintain part of their reserves in gold, even though gold was officially de-pegged from countries’ currencies after the collapse of the Bretton woods system. In this study, we employed panel data regression model to examine the determinants of demand for gold by countries. The result showed a positive relationship between the demand for gold and the price of gold, exchange rate, foreign direct investment, and private credit to GDP. It revealed that trade openness and inflation rate had a negative relationship with the demand for gold. Also, it was revealed that the price of gold had a positive relationship with Nigeria’s total reserves both in the short run and in the long run. On the other hand, while exchange rate had a positive relationship with Nigeria’s total reserves in the short run it exerts a negative relationship in the long run. Also trade openness and GDP growth rate had a negative relationship with Nigeria’s total reserves both in the short-run and in the long run. But inflation rate had a negative relationship with Nigeria’s total reserves in the long run. Based on these findings, the study recommends that Nigerian government should adopt a pro-active measure in strengthening and enhancing the total reserve base of the economy by including gold as a safe and hedging asset in the reserve portfolio, thereby enhancing the performance and resilience of our total reserves in the face of economic and financial downturns.
VL  - 11
IS  - 1
ER  -

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Author Information

Paul Atanda Orebiyi

Department of Economics, University of Uyo, Uyo, Nigeria
Mmeyene-Abasi Essien Archibong

Department of Economics, University of Uyo, Uyo, Nigeria

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APA Style

Paul Atanda Orebiyi, Mmeyene-Abasi Essien Archibong. (2022). Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries. Journal of World Economic Research, 11(1), 27-44. https://doi.org/10.11648/j.jwer.20221101.14

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ACS Style

Paul Atanda Orebiyi; Mmeyene-Abasi Essien Archibong. Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries. J. World Econ. Res. 2022, 11(1), 27-44. doi: 10.11648/j.jwer.20221101.14

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AMA Style

Paul Atanda Orebiyi, Mmeyene-Abasi Essien Archibong. Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries. J World Econ Res. 2022;11(1):27-44. doi: 10.11648/j.jwer.20221101.14

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@article{10.11648/j.jwer.20221101.14,
  author = {Paul Atanda Orebiyi and Mmeyene-Abasi Essien Archibong},
  title = {Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries},
  journal = {Journal of World Economic Research},
  volume = {11},
  number = {1},
  pages = {27-44},
  doi = {10.11648/j.jwer.20221101.14},
  url = {https://doi.org/10.11648/j.jwer.20221101.14},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20221101.14},
  abstract = {Over the years, gold has showed some promises in performing the role of value preservation for the holders and as a result helping countries in stabilizing their reserves. For this reason, several countries still maintain part of their reserves in gold, even though gold was officially de-pegged from countries’ currencies after the collapse of the Bretton woods system. In this study, we employed panel data regression model to examine the determinants of demand for gold by countries. The result showed a positive relationship between the demand for gold and the price of gold, exchange rate, foreign direct investment, and private credit to GDP. It revealed that trade openness and inflation rate had a negative relationship with the demand for gold. Also, it was revealed that the price of gold had a positive relationship with Nigeria’s total reserves both in the short run and in the long run. On the other hand, while exchange rate had a positive relationship with Nigeria’s total reserves in the short run it exerts a negative relationship in the long run. Also trade openness and GDP growth rate had a negative relationship with Nigeria’s total reserves both in the short-run and in the long run. But inflation rate had a negative relationship with Nigeria’s total reserves in the long run. Based on these findings, the study recommends that Nigerian government should adopt a pro-active measure in strengthening and enhancing the total reserve base of the economy by including gold as a safe and hedging asset in the reserve portfolio, thereby enhancing the performance and resilience of our total reserves in the face of economic and financial downturns.},
 year = {2022}
}

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TY  - JOUR
T1  - Gold Demand Determinants and Reserve Building Capacity of the Nigerian Economy: Inputs from a Panel Analysis of Selected Countries
AU  - Paul Atanda Orebiyi
AU  - Mmeyene-Abasi Essien Archibong
Y1  - 2022/02/19
PY  - 2022
N1  - https://doi.org/10.11648/j.jwer.20221101.14
DO  - 10.11648/j.jwer.20221101.14
T2  - Journal of World Economic Research
JF  - Journal of World Economic Research
JO  - Journal of World Economic Research
SP  - 27
EP  - 44
PB  - Science Publishing Group
SN  - 2328-7748
UR  - https://doi.org/10.11648/j.jwer.20221101.14
AB  - Over the years, gold has showed some promises in performing the role of value preservation for the holders and as a result helping countries in stabilizing their reserves. For this reason, several countries still maintain part of their reserves in gold, even though gold was officially de-pegged from countries’ currencies after the collapse of the Bretton woods system. In this study, we employed panel data regression model to examine the determinants of demand for gold by countries. The result showed a positive relationship between the demand for gold and the price of gold, exchange rate, foreign direct investment, and private credit to GDP. It revealed that trade openness and inflation rate had a negative relationship with the demand for gold. Also, it was revealed that the price of gold had a positive relationship with Nigeria’s total reserves both in the short run and in the long run. On the other hand, while exchange rate had a positive relationship with Nigeria’s total reserves in the short run it exerts a negative relationship in the long run. Also trade openness and GDP growth rate had a negative relationship with Nigeria’s total reserves both in the short-run and in the long run. But inflation rate had a negative relationship with Nigeria’s total reserves in the long run. Based on these findings, the study recommends that Nigerian government should adopt a pro-active measure in strengthening and enhancing the total reserve base of the economy by including gold as a safe and hedging asset in the reserve portfolio, thereby enhancing the performance and resilience of our total reserves in the face of economic and financial downturns.
VL  - 11
IS  - 1
ER  -

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