Table 4.
Econometric Specifications
| Fixed Effects | Random Effects | Arellano-Bond | Tobit | |||||
|---|---|---|---|---|---|---|---|---|
| EMDE | AE | EMDE | AE | EMDE | AE | EMDE | AE | |
| (1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | |
| Lagged Reserve Share | 0.68*** | 0.79*** | 0.88*** | 0.97*** | 0.57*** | 0.70*** | 0.68*** | 0.80*** |
| (0.02) | (0.06) | (0.02) | (0.01) | (0.05) | (0.11) | (0.03) | (0.04) | |
| Trade Share | -0.08 | 0.09 | 0.05*** | -0.02 | -0.23 | 0.02 | -0.08 | 0.08 |
| (0.10) | (0.13) | (0.02) | (0.03) | (0.16) | (0.19) | (0.10) | (0.07) | |
| FX Alignment | -0.06*** | 0.06*** | 0.01 | -0.08 | 0.00 | -0.06** | -0.03 | |
| (0.01) | (0.01) | (0.01) | (0.06) | (0.00) | (0.03) | (0.03) | ||
| Debt Share | 0.10*** | 0.03** | 0.16*** | 0.10*** | ||||
| (0.04) | (0.02) | (0.06) | (0.03) | |||||
| Bank Claims Share | 0.08*** | 0.03** | 0.05* | 0.08 | ||||
| (0.03) | (0.01) | (0.03) | (0.05) | |||||
| Observations | 1,585 | 417 | 1,585 | 417 | 1,450 | 385 | 1,585 | 417 |
| Hausman Test (p-value) | 0.00 | 0.00 | ||||||
Robust standard errors in parentheses. ***, **, * indicates significance at the 1%, 5%, and 10% levels, respectively. All specifications include time and country-currency fixed (random) effects. Reserve shares for four reserve currencies (US dollar, British pound, Japanese yen, and euro) are obtained from the central banks’ websites. “Trade Share” is the share of trade with the reserve issuer, obtained from the Direction of Trade Statistics. “FX Alignment” is a dummy variable equal to one if the exchange rate co-moves with the reserve currency, as estimated by Ilzetzki et al. (2019). “Debt Share” is the share of public debt denominated in a given reserve currency, obtained from the World Bank International Debt Statistics dataset. “Bank Claims Share” is the share of cross-border bank claims denominated in a given reserve currency obtained from the BIS international banking data by location. AE 5 advanced economies; EMDE 5 emerging market and developing economies