Gold and the U.S. dollar: tales from the turmoil
AbstractWe investigate how the relation between gold prices and the U.S. dollar has been affected by the recent turmoil in financial markets. We use spot prices of gold and spot bilateral exchange rates against the euro and the British pound to study the pattern of volatility spillovers. We estimate the bivariate structural GARCH models proposed by Spargoli and Zagaglia to gauge the causal relations between volatility changes in the two assets. We also apply the tests for change of co-dependence of Cappiello et al. to study the impact of the turmoil on the relation between gold and the U.S. dollar. We document the ability of gold to generate stable comovements with the dollar exchange rate that have survived the recent phases of market disruption. Our findings also show that exogenous increases in market uncertainty have tended to produce reactions of gold prices that are more stable than those of the U.S. dollar.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Quantitative Finance.
Volume (Year): 13 (2013)
Issue (Month): 4 (March)
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Web page: http://www.tandfonline.com/RQUF20
Other versions of this item:
- Marzo, Massimiliano & Zagaglia, Paolo, 2010. "Gold and the U.S. Dollar: Tales from the turmoil," MPRA Paper 22407, University Library of Munich, Germany.
- Massimiliano Marzo & Paolo Zagaglia, 2010. "Gold and the U.S. Dollar: Tales from the Turmoil," Working Paper Series 08_10, The Rimini Centre for Economic Analysis.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
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