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Dynamics Between Strategic Commodities and Financial Variables

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  • Thai-Ha LE

    (Division of Economics, Nanyang Technological University, Singapore 639798, Singapore)

  • Youngho CHANG

    (Division of Economics, Nanyang Technological University, Singapore 639798, Singapore)

Abstract

This study employs the bounds testing approach to cointegration to investigate the relationships between the prices of two strategic commodities (oil and gold) and the financial variables (interest rates, exchange rates and stock prices) of Japan – a major oil-consuming and goldholding country. Our results suggest that the prices of gold and stock can help form expectations of higher inflation over time. In the short run, only gold prices impact the interest rate in Japan. Overall the findings of this study could help the Japanese monetary authority in conducting monetary policy and investors of Japanese yen in building their optimal portfolios. Specifically our findings suggest that the optimal choice in the long term for those who invest in yendenominated assets would be to include gold in their portfolios.

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File URL: http://www3.ntu.edu.sg/hss2/egc/wp/2011/2011-04.pdf
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Bibliographic Info

Paper provided by Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre in its series Economic Growth centre Working Paper Series with number 1104.

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Length: 29 pages
Date of creation: Apr 2011
Date of revision:
Handle: RePEc:nan:wpaper:1104

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Postal: Nanyang Avenue, Singapore 639798.
Fax: 6794 2830
Web page: http://egc.hss.ntu.edu.sg/
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Keywords: strategic commodities; financial variables; bounds test to cointegration;

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