arXiv subjects

Stephen G. Hall

Publications and source records attributed to Stephen G. Hall.

3 recordsLinked to original sources

arXiv2026

Dynamics of the Currency Composition of Central Bank Reserves

We examine how macroeconomic and geopolitical developments in the United States, the euro area, and China affect the currency composition of central banks' foreign exchange reserves. Using an unbalanced panel of reserve shares for 53 countries over 1999-2023, we estimate a constrained system of equations that explicitly imposes the adding-up restriction on reserve shares. The results indicate substantial persistence in reserve holdings and significant cross-currency dependence, supporting a system-wide dynamics of reserve composition. In the country fixed-effects specification (1) issuer economic size, (2) uncertainty, (3) sanctions, (4) trade linkages, and (5) issuer credibility are significantly associated with reserve allocation across currencies. With the inclusion of year fixed effects, the persistence and cross-currency dependence remain, while trade linkages and sanctions emerge as the most important determinants of reserve composition. The results highlight the importance of accounting for the compositional nature and interdependence of reserve shares when examining the determinants of global reserve holdings.

econ.GN↗

arXiv2023

Identifying spatial interdependence in panel data with large N and small T

This paper develops a simple two-stage variational Bayesian algorithm to estimate panel spatial autoregressive models, where N, the number of cross-sectional units, is much larger than T, the number of time periods without restricting the spatial effects using a predetermined weighting matrix. We use Dirichlet-Laplace priors for variable selection and parameter shrinkage. Without imposing any a priori structures on the spatial linkages between variables, we let the data speak for themselves. Extensive Monte Carlo studies show that our method is super-fast and our estimated spatial weights matrices strongly resemble the true spatial weights matrices. As an illustration, we investigate the spatial interdependence of European Union regional gross value added growth rates. In addition to a clear pattern of predominant country clusters, we have uncovered a number of important between-country spatial linkages which are yet to be documented in the literature. This new procedure for estimating spatial effects is of particular relevance for researchers and policy makers alike.

econ.EM↗

arXiv2023

Fast Two-Stage Variational Bayesian Approach to Estimating Panel Spatial Autoregressive Models with Unrestricted Spatial Weights Matrices

This paper proposes a fast two-stage variational Bayesian (VB) algorithm to estimate unrestricted panel spatial autoregressive models. Using Dirichlet-Laplace priors, we are able to uncover the spatial relationships between cross-sectional units without imposing any a priori restrictions. Monte Carlo experiments show that our approach works well for both long and short panels. We are also the first in the literature to develop VB methods to estimate large covariance matrices with unrestricted sparsity patterns, which are useful for popular large data models such as Bayesian vector autoregressions. In empirical applications, we examine the spatial interdependence between euro area sovereign bond ratings and spreads. We find marked differences between the spillover behaviours of the northern euro area countries and those of the south.

econ.EM↗