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On the relationship between oil and gold before and after financial crisis: linear, nonlinear and time-varying causality testing

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  • Bampinas Georgios
  • Panagiotidis Theodore

    () (Department of Economics, University of Macedonia, 156 Egnatia street, Thessaloniki 54006, Greece)

Abstract

We examine the causal relationship between crude oil and gold spot prices before and after the recent financial crisis. In the pre-crisis period, causality is linear and unidirectional, running from oil to gold. In the post-crisis period, a bidirectional nonlinear causality relationship emerges. Volatility spillover transpires as the source of nonlinearity during this period. The time path of the causal linkages both for the returns and the levels (cointegration) was assessed via dynamic bootstrap causality analysis. We find that the causal linkage from gold to oil is time dependent and that the non-Granger causality null hypothesis rejection rate increased considerably in the post-financial crisis period. The probability of gold Granger causing oil in the short-run increases by more than 30% during the recent financial and euro crisis.

Suggested Citation

  • Bampinas Georgios & Panagiotidis Theodore, 2015. "On the relationship between oil and gold before and after financial crisis: linear, nonlinear and time-varying causality testing," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(5), pages 657-668, December.
  • Handle: RePEc:bpj:sndecm:v:19:y:2015:i:5:p:657-668:n:6
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    8. Semei Coronado & Rebeca Jim'enez-Rodr'iguez & Omar Rojas, 2015. "An empirical analysis of the relationships between crude oil, gold and stock markets," Papers 1510.07599, arXiv.org, revised May 2016.
    9. Beckmann, Joscha & Czudaj, Robert & Pilbeam, Keith, 2015. "Causality and volatility patterns between gold prices and exchange rates," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 292-300.
    10. Le, Thai-Ha & Chang, Youngho, 2016. "Dynamics between strategic commodities and financial variables: Evidence from Japan," Resources Policy, Elsevier, vol. 50(C), pages 1-9.
    11. Shahbaz, Muhammad & Balcilar, Mehmet & Abidin Ozdemir, Zeynel, 2017. "Does oil predict gold? A nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 52(C), pages 257-265.
    12. repec:eee:ecosys:v:42:y:2018:i:1:p:164-173 is not listed on IDEAS
    13. De Vita, Glauco & Trachanas, Emmanouil, 2016. "‘Nonlinear causality between crude oil price and exchange rate: A comparative study of China and India’ — A failed replication (negative Type 1 and Type 2)," Energy Economics, Elsevier, vol. 56(C), pages 150-160.
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    17. Georgios Bampinas & Theodore Panagiotidis, 2017. "Oil and stock markets before and after financial crises: A local Gaussian correlation approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(12), pages 1179-1204, December.
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    19. Joscha Beckmann & Theo Berger & Robert Czudaj, 2017. "Gold Price Dynamics and the Role of Uncertainty," Chemnitz Economic Papers 006, Department of Economics, Chemnitz University of Technology, revised May 2017.
    20. Arfaoui, Mongi & Ben Rejeb, Aymen, 2016. "Oil, Gold, US dollar and Stock market interdependencies: A global analytical insight," MPRA Paper 70452, University Library of Munich, Germany.
    21. de Almeida, Daniel & Hotta, Luiz K. & Ruiz, Esther, 2018. "MGARCH models: Trade-off between feasibility and flexibility," International Journal of Forecasting, Elsevier, vol. 34(1), pages 45-63.

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