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Can gold prices forecast the Australian dollar movements?

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  • Apergis, Nicholas

Abstract

This paper explores whether gold prices have a reliable out-of-sample relationship with the Australian dollar/US dollar nominal and real exchange rates using daily and quarterly data, respectively, spanning the period 2000–2012. Through an Error Correction Model (ECM), the empirical findings suggest that the out-of-sample predictive ability is strong and robust across short- and long-run horizons. The results could offer informational availability for monetary policymakers, hedge fund managers and international portfolio managers. They also provide additional support to the hypothesis that both markets are driven by the same information sets.

Suggested Citation

  • Apergis, Nicholas, 2014. "Can gold prices forecast the Australian dollar movements?," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 75-82.
    • Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:75-82
    DOI: 10.1016/j.iref.2013.04.004
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    More about this item

    Keywords

    Gold prices; Australian dollar/US dollar exchange rate; Error Correction Model; Predictive ability;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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