IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v90y2024ics0301420724000552.html
   My bibliography  Save this article

The impacts of geopolitical risks on gold, oil and financial reserve management

Author

Listed:
  • Ngo, Vu Minh
  • Nguyen, Phuc Van
  • Hoang, Yen Hai

Abstract

This study explores the influence of geopolitical risks on national reserves and resource management strategies across 108 countries from 1990 to 2021. Using the Geopolitical Risk (GPR) index and major geopolitical events, and applying a two-step system GMM approach, we find that geopolitical risks adversely influence a country's ability to accumulate total reserves relative to its external debt. This indicates considerable challenges in resource management amid geopolitical instability. We also find that the role of different types of reserves varies, with gold serving as a safe haven and financial and other reserves being used to meet immediate economic needs. Additionally, the role of natural resources like oil emerges as an alternative revenue stream in geopolitically risky contexts. Our findings underscore the necessity for flexible and robust economic policies to mitigate the impacts of geopolitical risks on national reserves and resource management.

Suggested Citation

  • Ngo, Vu Minh & Nguyen, Phuc Van & Hoang, Yen Hai, 2024. "The impacts of geopolitical risks on gold, oil and financial reserve management," Resources Policy, Elsevier, vol. 90(C).
    • Handle: RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724000552
    DOI: 10.1016/j.resourpol.2024.104688
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420724000552
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2024.104688?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thorvaldur Gylfason, 2001. "Nature, Power and Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(5), pages 558-588, November.
    2. Libing Fang & Baizhu Chen & Honghai Yu & Yichuo Qian, 2018. "The importance of global economic policy uncertainty in predicting gold futures market volatility: A GARCH‐MIDAS approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(3), pages 413-422, March.
    3. Steiner, Andreas, 2014. "Reserve accumulation and financial crises: From individual protection to systemic risk," European Economic Review, Elsevier, vol. 70(C), pages 126-144.
    4. repec:bla:econom:v:41:y:1974:i:161:p:14-24 is not listed on IDEAS
    5. Joshua Aizenman & Jaewoo Lee, 2007. "International Reserves: Precautionary Versus Mercantilist Views, Theory and Evidence," Open Economies Review, Springer, vol. 18(2), pages 191-214, April.
    6. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
    7. Andrei Shleifer & Robert Vishny, 2011. "Fire Sales in Finance and Macroeconomics," Journal of Economic Perspectives, American Economic Association, vol. 25(1), pages 29-48, Winter.
    8. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    9. Ms. Rina Bhattacharya, 2022. "Managing Guyana’s Oil Wealth: Monetary and Exchange Rate Policy Considerations," IMF Working Papers 2022/224, International Monetary Fund.
    10. Asai, Manabu & Gupta, Rangan & McAleer, Michael, 2020. "Forecasting volatility and co-volatility of crude oil and gold futures: Effects of leverage, jumps, spillovers, and geopolitical risks," International Journal of Forecasting, Elsevier, vol. 36(3), pages 933-948.
    11. Pindyck, Robert S & Rotemberg, Julio J, 1990. "The Excess Co-movement of Commodity Prices," Economic Journal, Royal Economic Society, vol. 100(403), pages 1173-1189, December.
    12. Bordo Michael D. & Kydland Finn E., 1995. "The Gold Standard As a Rule: An Essay in Exploration," Explorations in Economic History, Elsevier, vol. 32(4), pages 423-464, October.
    13. Abdul Rehman & Hengyun Ma & Rafael Alvarado & Fayyaz Ahmad, 2023. "The nexus of military, final consumption expenditures, total reserves, and economic development of Pakistan," Economic Change and Restructuring, Springer, vol. 56(3), pages 1753-1776, June.
    14. Akhtaruzzaman, Md & Boubaker, Sabri & Lucey, Brian M. & Sensoy, Ahmet, 2021. "Is gold a hedge or a safe-haven asset in the COVID–19 crisis?," Economic Modelling, Elsevier, vol. 102(C).
    15. He, Zhen & O'Connor, Fergal & Thijssen, Jacco, 2018. "Is gold a Sometime Safe Haven or an Always Hedge for equity investors? A Markov-Switching CAPM approach for US and UK stock indices," International Review of Financial Analysis, Elsevier, vol. 60(C), pages 30-37.
    16. Rogerio Andrade & Daniela Prates, 2013. "Exchange rate dynamics in a peripheral monetary economy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 35(3), pages 399-416.
    17. Jin, Jiayu & Han, Liyan & Xu, Yang, 2022. "Does the SDR stabilize investing in commodities?," International Review of Economics & Finance, Elsevier, vol. 81(C), pages 160-172.
    18. Naif Alsagr & Stefan F. Van Hemmen Almazor, 2020. "Oil Rent, Geopolitical Risk and Banking Sector Performance," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 305-314.
    19. Benedictow, Andreas & Fjærtoft, Daniel & Løfsnæs, Ole, 2013. "Oil dependency of the Russian economy: An econometric analysis," Economic Modelling, Elsevier, vol. 32(C), pages 400-428.
    20. Rangan Gupta & Giray Gozgor & Huseyin Kaya & Ender Demir, 2019. "Effects of geopolitical risks on trade flows: evidence from the gravity model," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 515-530, December.
    21. Škare, Marinko & Soriano, Domingo Riberio & Porada-Rochoń, Małgorzata, 2021. "Impact of COVID-19 on the travel and tourism industry," Technological Forecasting and Social Change, Elsevier, vol. 163(C).
    22. Hussain Shahzad, Syed Jawad & Bouri, Elie & Roubaud, David & Kristoufek, Ladislav, 2020. "Safe haven, hedge and diversification for G7 stock markets: Gold versus bitcoin," Economic Modelling, Elsevier, vol. 87(C), pages 212-224.
    23. Hon Chung Hui, 2021. "The long-run effects of geopolitical risk on foreign exchange markets: evidence from some ASEAN countries," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 17(6), pages 1543-1564, January.
    24. Vu M. Ngo & Toan L.D. Huynh & Phuc V. Nguyen & Huan H. Nguyen, 2022. "Public sentiment towards economic sanctions in the Russia-Ukraine war," GLO Discussion Paper Series 1108, Global Labor Organization (GLO).
    25. Fen Li & Zhehao Huang & Junhao Zhong & Khaldoon Albitar, 2020. "Do Tense Geopolitical Factors Drive Crude Oil Prices?," Energies, MDPI, vol. 13(16), pages 1-20, August.
    26. Wang, Kai-Hua & Su, Chi-Wei & Umar, Muhammad, 2021. "Geopolitical risk and crude oil security: A Chinese perspective," Energy, Elsevier, vol. 219(C).
    27. Karim, Sitara & Lucey, Brian M. & Naeem, Muhammad Abubakr & Uddin, Gazi Salah, 2022. "Examining the interrelatedness of NFTs, DeFi tokens and cryptocurrencies," Finance Research Letters, Elsevier, vol. 47(PB).
    28. Vu M. Ngo & Toan L. D. Huynh & Phuc V. Nguyen & Huan H. Nguyen, 2022. "Public sentiment towards economic sanctions in the Russia–Ukraine war," Scottish Journal of Political Economy, Scottish Economic Society, vol. 69(5), pages 564-573, November.
    29. Kevin Cashman & Andrés Arauz & Lara Merling, 2022. "Special Drawing Rights: The Right Tool to Use to Respond to the Pandemic and Other Challenges," Challenge, Taylor & Francis Journals, vol. 65(5-6), pages 176-198, November.
    30. Sami Ben Jabeur & Salma Mefteh-Wali & Jean-Laurent Viviani, 2021. "Forecasting gold price with the XGBoost algorithm and SHAP interaction values," Post-Print hal-03331805, HAL.
    31. Yacob Mulugetta & Youba Sokona & Philipp A. Trotter & Samuel Fankhauser & Jessica Omukuti & Lucas Somavilla Croxatto & Bjarne Steffen & Meron Tesfamichael & Edo Abraham & Jean-Paul Adam & Lawrence Agb, 2022. "Africa needs context-relevant evidence to shape its clean energy future," Nature Energy, Nature, vol. 7(11), pages 1015-1022, November.
    32. Mei, Dexiang & Ma, Feng & Liao, Yin & Wang, Lu, 2020. "Geopolitical risk uncertainty and oil future volatility: Evidence from MIDAS models," Energy Economics, Elsevier, vol. 86(C).
    33. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    34. Baur, Dirk G. & McDermott, Thomas K.J., 2016. "Why is gold a safe haven?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 10(C), pages 63-71.
    35. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    36. Neil Johnson & Michael Spagat & Jorge A. Restrepo & Nicolás Suárez, 2005. "From old wars to new wars and global terrorism," Documentos de Economía 2745, Universidad Javeriana - Bogotá.
    37. Tang, Chang & Irfan, Muhammad & Razzaq, Asif & Dagar, Vishal, 2022. "Natural resources and financial development: Role of business regulations in testing the resource-curse hypothesis in ASEAN countries," Resources Policy, Elsevier, vol. 76(C).
    38. Jane D'Arista, 2009. "The evolving international monetary system," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 633-652, July.
    39. Antoniou, Antonios & Guney, Yilmaz & Paudyal, Krishna, 2008. "The Determinants of Capital Structure: Capital Market-Oriented versus Bank-Oriented Institutions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(1), pages 59-92, March.
    40. Benjamin Kang & James Unwin, 2020. "All-Pay Auctions as Models for Trade Wars and Military Annexation," Papers 2002.03492, arXiv.org.
    41. Plümper, Thomas & Troeger, Vera E., 2019. "Not so Harmless After All: The Fixed-Effects Model," Political Analysis, Cambridge University Press, vol. 27(1), pages 21-45, January.
    42. Mohammad Main Uddin & Md. Mamunar Rashid & Rabiul Islam & Humaira Begum, 2022. "Measuring the Connotations of Economic Variables with External Debts of Bangladesh," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 12(10), pages 379-395.
    43. Gong, Xu & Sun, Yi & Du, Zhili, 2022. "Geopolitical risk and China's oil security," Energy Policy, Elsevier, vol. 163(C).
    44. Dietrich Domanski & Emanuel Kohlscheen & Ramon Moreno, 2016. "Foreign exchange market intervention in EMEs: what has changed?," BIS Quarterly Review, Bank for International Settlements, September.
    45. Li, Yingli & Huang, Jianbai & Gao, Wang & Zhang, Hongwei, 2021. "Analyzing the time-frequency connectedness among oil, gold prices and BRICS geopolitical risks," Resources Policy, Elsevier, vol. 73(C).
    46. George Davis, 2021. "The many ways COVID-19 affects households: consumption, time, and health outcomes," Review of Economics of the Household, Springer, vol. 19(2), pages 281-289, June.
    47. Ngo, Vu Minh & Van Nguyen, Phuc & Nguyen, Huan Huu & Thi Tram, Huong Xuan & Hoang, Long Cuu, 2023. "Governance and monetary policy impacts on public acceptance of CBDC adoption," Research in International Business and Finance, Elsevier, vol. 64(C).
    48. Bloch, Robin & Owusu, George, 2012. "Linkages in Ghana's gold mining industry: Challenging the enclave thesis," Resources Policy, Elsevier, vol. 37(4), pages 434-442.
    49. Meng Qin & Chi-Wei Su & Xin-Zhou Qi & Lin-Na Hao, 2020. "Should gold be stored in chaotic eras?," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 224-242, January.
    50. Shafiee, Shahriar & Topal, Erkan, 2010. "An overview of global gold market and gold price forecasting," Resources Policy, Elsevier, vol. 35(3), pages 178-189, September.
    51. M S Mohanty & Philip Turner, 2006. "Foreign exchange reserve accumulation in emerging markets: what are the domestic implications?," BIS Quarterly Review, Bank for International Settlements, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dong, Kangyin & Yang, Senmiao & Wang, Jianda & Nepal, Rabindra & Jamasb, Tooraj, 2024. "Does Geopolitical Risk Accelerate Climate Vulnerability? New Evidence from the European Green Deal," Working Papers 15-2024, Copenhagen Business School, Department of Economics.
    2. Xu, Shuanglei & Deng, Youyi & Nepal, Rabindra & Jamasb, Tooraj, 2024. "Geopolitical Conflict and Risk and the EU Energy Trading: A Dynamic Evolutionary Networks Analysis," Working Papers 14-2024, Copenhagen Business School, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kaczmarek, Tomasz & Będowska-Sójka, Barbara & Grobelny, Przemysław & Perez, Katarzyna, 2022. "False Safe Haven Assets: Evidence From the Target Volatility Strategy Based on Recurrent Neural Network," Research in International Business and Finance, Elsevier, vol. 60(C).
    2. Enilov, Martin & Mensi, Walid & Stankov, Petar, 2023. "Does safe haven exist? Tail risks of commodity markets during COVID-19 pandemic," Journal of Commodity Markets, Elsevier, vol. 29(C).
    3. Li, Songsong & Zhang, Weiqian & Zhang, Wei, 2023. "Dynamic time-frequency connectedness and risk spillover between geopolitical risks and natural resources," Resources Policy, Elsevier, vol. 82(C).
    4. Abakah, Emmanuel Joel Aikins & Adeabah, David & Tiwari, Aviral Kumar & Abdullah, Mohammad, 2023. "Effect of Russia–Ukraine war sentiment on blockchain and FinTech stocks," International Review of Financial Analysis, Elsevier, vol. 90(C).
    5. Feng, Jingyu & Yuan, Ying & Jiang, Mingxuan, 2024. "Are stablecoins better safe havens or hedges against global stock markets than other assets? Comparative analysis during the COVID-19 pandemic," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 275-301.
    6. Salisu, Afees A. & Gupta, Rangan & Bouri, Elie & Ji, Qiang, 2020. "The role of global economic conditions in forecasting gold market volatility: Evidence from a GARCH-MIDAS approach," Research in International Business and Finance, Elsevier, vol. 54(C).
    7. Duc Hong Vo & Minh Phuoc-Bao Tran, 2023. "Do geopolitical risks from the economic powers dominate world gold return? Evidence from the quantile connectedness approach," Economic Change and Restructuring, Springer, vol. 56(6), pages 4661-4688, December.
    8. Chen, Zhuoyi & Liu, Yuanyuan & Zhang, Hongwei, 2024. "Can geopolitical risks impact the long-run correlation between crude oil and clean energy markets? Evidence from a regime-switching analysis," Renewable Energy, Elsevier, vol. 229(C).
    9. Gong, Xu & Xu, Jun, 2022. "Geopolitical risk and dynamic connectedness between commodity markets," Energy Economics, Elsevier, vol. 110(C).
    10. Kamal, Javed Bin & Wohar, Mark & Kamal, Khaled Bin, 2022. "Do gold, oil, equities, and currencies hedge economic policy uncertainty and geopolitical risks during covid crisis?," Resources Policy, Elsevier, vol. 78(C).
    11. Al-Nassar, Nassar S. & Boubaker, Sabri & Chaibi, Anis & Makram, Beljid, 2023. "In search of hedges and safe havens during the COVID─19 pandemic: Gold versus Bitcoin, oil, and oil uncertainty," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 318-332.
    12. Zhang, Yulian & Hamori, Shigeyuki, 2022. "A connectedness analysis among BRICS’s geopolitical risks and the US macroeconomy," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 182-203.
    13. Rangan Gupta & Sayar Karmakar & Christian Pierdzioch, 2024. "Safe Havens, Machine Learning, and the Sources of Geopolitical Risk: A Forecasting Analysis Using Over a Century of Data," Computational Economics, Springer;Society for Computational Economics, vol. 64(1), pages 487-513, July.
    14. Soni, Rajat Kumar & Nandan, Tanuj, 2022. "Modeling Covid-19 contagious effect between asset markets and commodity futures in India," Resources Policy, Elsevier, vol. 79(C).
    15. Shahzad, Umer & Mohammed, Kamel Si & Tiwari, Sunil & Nakonieczny, Joanna & Nesterowicz, Renata, 2023. "Connectedness between geopolitical risk, financial instability indices and precious metals markets: Novel findings from Russia Ukraine conflict perspective," Resources Policy, Elsevier, vol. 80(C).
    16. Tarchella, Salma & Khalfaoui, Rabeh & Hammoudeh, Shawkat, 2024. "The safe haven, hedging, and diversification properties of oil, gold, and cryptocurrency for the G7 equity markets: Evidence from the pre- and post-COVID-19 periods," Research in International Business and Finance, Elsevier, vol. 67(PB).
    17. Wang, Lu & Ma, Feng & Hao, Jianyang & Gao, Xinxin, 2021. "Forecasting crude oil volatility with geopolitical risk: Do time-varying switching probabilities play a role?," International Review of Financial Analysis, Elsevier, vol. 76(C).
    18. Gök, Remzi & Bouri, Elie & Gemici, Eray, 2022. "Can Twitter-based economic uncertainty predict safe-haven assets under all market conditions and investment horizons?," Technological Forecasting and Social Change, Elsevier, vol. 185(C).
    19. N.S. Al-Nassar & Sabri Boubaker & A. Chaibi & B. Makram, 2023. "In Search of Hedges and Safe Havens during the COVID-19 Pandemic: Gold versus Bitcoin, Oil, and Oil Uncertainty," Post-Print hal-04435437, HAL.
    20. Wu, Jie & Zhao, Ruizeng & Sun, Jiasen & Zhou, Xuewei, 2023. "Impact of geopolitical risks on oil price fluctuations: Based on GARCH-MIDAS model," Resources Policy, Elsevier, vol. 85(PB).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724000552. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.