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Is gold investment a hedge against inflation in Pakistan? A co-integration and causality analysis in the presence of structural breaks

  • Shahbaz, Muhammad
  • Tahir, Mohammad Iqbal
  • Ali, Imran
  • Rehman, Ijaz Ur

The last few years have witnessed overwhelming investments in the gold market. Numerous studies have discussed how investment in gold is a hedge against inflation. The current study investigates whether a gold investment is a hedge against inflation in case of Pakistan. In doing so, we have used time series data on gold prices; economic growth and inflation are used for the period of 1997Q1–2011Q4. The study has applied the ARDL bounds testing approach to co-integration for the long run, and innovative accounting approach (IAA) to examine the direction of causality in variables. Our findings reveal that “investment in gold is a good hedge against inflation” not only in the long-run but also in the short-run. The implications and applications of the study are discussed in detail.

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Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

Volume (Year): 28 (2014)
Issue (Month): C ()
Pages: 190-205

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Handle: RePEc:eee:ecofin:v:28:y:2014:i:c:p:190-205
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620163

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