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Gold bubbles: When are they most likely to occur?

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  • Zhao, Yanping
  • Chang, Hsu-Ling
  • Su, Chi-Wei
  • Nian, Rui

Abstract

We assess when gold bubbles are most likely to occur. This question is particularly important since the price of gold fluctuates rapidly during the financial crisis of 2007–2012. We use Phillips et al. (2012, 2013) tests to identify bubbles in the gold market since the breakdown of the Bretton Woods System. Five periods of bubbles are identified. We argue that the occurrence of gold bubbles is influenced by investors’ “flight to safety” during financial crises. If global central banks implement expansionary monetary policy to stimulate the economy, a gold bubble may arise.

Suggested Citation

  • Zhao, Yanping & Chang, Hsu-Ling & Su, Chi-Wei & Nian, Rui, 2015. "Gold bubbles: When are they most likely to occur?," Japan and the World Economy, Elsevier, vol. 34, pages 17-23.
    • Handle: RePEc:eee:japwor:v:34-35:y:2015:i::p:17-23
    DOI: 10.1016/j.japwor.2015.03.001
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    More about this item

    Keywords

    Gold bubbles; Financial crisis; Sup ADF test; Generalized sup ADF test; Right-sided unit root test;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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