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The Price of Gold and the Exchange Rates: Once Again

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  • Larry A. Sjaastad

    (UWA Business School, The University of Western Australia)

Abstract

This paper examines the theoretical and empirical relationships between the major exchange rates and the price of gold using forecast error data. Among other things, it is found that, since the dissolution of the Bretton Woods international monetary system, floating exchange rates among the major currencies have been a major source of price instability in the world gold market and, as the world gold market now seems to be dominated by the U.S. dollar bloc, appreciations or depreciations of that dollar would have strong effects on the price of gold in other currencies. The results of this study are rather different from those obtained in an earlier study of the same subject.

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File URL: http://www.business.uwa.edu.au/school/disciplines/economics/?a=98660
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Bibliographic Info

Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 07-20.

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Length: 15 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:uwa:wpaper:07-20

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  1. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-53, October.
  2. Rudiger Dornbusch, 1986. "Exchange Rate Economics: 1986," NBER Working Papers 2071, National Bureau of Economic Research, Inc.
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Cited by:
  1. Yue-Jun Zhang & Yi-Ming Wei, 2009. "The crude oil market and the gold market: Evidence for cointegration, causality and price discovery," CEEP-BIT Working Papers 5, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
  2. Baur, Dirk G., 2011. "Explanatory mining for gold: Contrasting evidence from simple and multiple regressions," Resources Policy, Elsevier, vol. 36(3), pages 265-275, September.
  3. Pierdzioch, Christian & Risse, Marian & Rohloff, Sebastian, 2014. "The international business cycle and gold-price fluctuations," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(2), pages 292-305.
  4. Joscha Beckmann & Robert Czudaj, 2013. "Oil and gold price dynamics in a multivariate cointegration framework," International Economics and Economic Policy, Springer, vol. 10(3), pages 453-468, September.
  5. Thai-Ha LE & Youngho CHANG, 2011. "Dynamics Between Strategic Commodities and Financial Variables," Economic Growth centre Working Paper Series 1104, Nanyang Technolgical University, School of Humanities and Social Sciences, Economic Growth centre.
  6. Baffes, John & Dennis, Allen, 2013. "Long-term drivers of food prices," Policy Research Working Paper Series 6455, The World Bank.
  7. Goodness C. Aye & Rangan Gupta & Shawkat Hammoudeh & Won Joong Kim, 2014. "Forecasting the Price of Gold Using Dynamic Model Averaging," Working Papers 201415, University of Pretoria, Department of Economics.
  8. Le, Thai-Ha & Chang, Youngho, 2011. "Dynamic relationships between the price of oil, gold and financial variables in Japan: a bounds testing approach," MPRA Paper 33030, University Library of Munich, Germany.
  9. Mark, Joy, 2011. "Gold and the US dollar: Hedge or haven?," Finance Research Letters, Elsevier, vol. 8(3), pages 120-131, September.
  10. Wang, Kuan-Min & Lee, Yuan-Ming, 2011. "The yen for gold," Resources Policy, Elsevier, vol. 36(1), pages 39-48, March.

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