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A theoretical fundamental model of USD/CAD, gold spot and gold futures with interest rates, growth and financialisation

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  • Mykola Yaremenko

    (National Technical University of Ukraine Igor Sikorsky Kyiv Polytechnic Institute, Kyiv, Ukraine)

Abstract

We develop a three-equation structural model linking the USD/CAD exchange rate, the spot price of gold and gold futures prices. The framework explicitly incorporates real interest rates and financialisation indices for both the United States and Canada, while output gaps influence the exchange rate indirectly through channels including monetary policy expectations, risk appetite and commodity demand. The model accounts for the commodity-currency nature of the Canadian dollar, the opportunity cost of holding gold, and the carry-arbitrage relationship augmented by speculative demand. We derive the model’s reduced-form properties and discuss its key theoretical predictions as well as cross-equation feedback mechanisms. Preliminary empirical validation based on cointegration analysis and structural vector autoregression (SVAR) estimation confirms the model’s principal theoretical predictions. The analysis highlights the amplification effects arising from the mutual feedback between the exchange rate and gold prices.

Suggested Citation

  • Mykola Yaremenko, 2026. "A theoretical fundamental model of USD/CAD, gold spot and gold futures with interest rates, growth and financialisation," Research Papers in Economics and Finance, Poznań University of Economics and Business, vol. 10(1), pages 85-115, October.
    • Handle: RePEc:jbl:ref000:v:10:y:2026:i:1:id:4074
    DOI: 10.18559/ref.2026.1.4074
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    References listed on IDEAS

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