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Rolling, recursive evolving and asymmetric causality between crude oil and gold prices: Evidence from an emerging market

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  • Mishra, Aswini Kumar
  • Ghate, Kshitish
  • Renganathan, Jayashree
  • Kennet, Joushita J.
  • Rajderkar, Nilay Pradeep

Abstract

This study investigates the causal relationships among spot and futures prices of crude oil and gold for the Indian market by applying rolling, recursive evolving and asymmetric causality tests, for the period spanning from January 2006 to February 2019. Using the rolling and recursive evolving Granger causality test, this study investigates the time-varying nature of causality between the prices of crude oil and gold. The results indicate that there exist causal linkages both from crude oil prices to gold prices, and vice-versa, during different sub-periods between January 2006 and February 2019, for the spot prices as well as the futures prices. The asymmetric causality tests reveal that negative shocks and positive shocks in oil prices Granger causes gold prices, and vice-versa, considering both spot and futures prices. In addition, the asymmetric causality tests show that positive shocks in crude oil prices and gold prices have a more significant impact on gold prices and crude oil prices respectively as compared to a negative shock in crude oil prices and gold price. This study's findings may be of particular relevance to policymakers and risk management professionals who need to comprehend the behavior of crude oil and gold commodity markets and the relationships that exist between them.

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  • Mishra, Aswini Kumar & Ghate, Kshitish & Renganathan, Jayashree & Kennet, Joushita J. & Rajderkar, Nilay Pradeep, 2022. "Rolling, recursive evolving and asymmetric causality between crude oil and gold prices: Evidence from an emerging market," Resources Policy, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:jrpoli:v:75:y:2022:i:c:s0301420721004827
    DOI: 10.1016/j.resourpol.2021.102474
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    8. Cheng, Sheng & Han, Lingyu & Cao, Yan & Jiang, Qisheng & Liang, Ruibin, 2022. "Gold-oil dynamic relationship and the asymmetric role of geopolitical risks: Evidence from Bayesian pdBEKK-GARCH with regime switching," Resources Policy, Elsevier, vol. 78(C).
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    12. Hong, Yun & Zhang, Rushan & Zhang, Feipeng, 2024. "Time-varying causality impact of economic policy uncertainty on stock market returns: Global evidence from developed and emerging countries," International Review of Financial Analysis, Elsevier, vol. 91(C).

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    More about this item

    Keywords

    Time-varying Granger causality; Asymmetric causality; Crude oil and gold prices; Rolling and recursive evolving estimation;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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