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Oil and gold price dynamics in a multivariate cointegration framework

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  • Joscha Beckmann
  • Robert Czudaj

Abstract

This study delivers further insights into oil and gold price dynamics and their relation to U.S. prices and the dollar exchange rate. Previous studies have frequently analyzed this issue regarding the price either of gold or of oil; however, the role of both quantities has not been analyzed simultaneously in a broader context. To tackle this caveat, we use monthly data for the nominal effective dollar exchange rate, oil, gold and U.S. prices from 1976:01 to 2011:11. We carefully analyze the long-run as well as the short-run dynamics and the long-run impact in terms of shocks, applying a cointegrated VAR model. The main conclusion we reach is that although gold and oil are both important commodities, their economic impact in terms of their shocks differs significantly. In the long-run, both quantities seem to be positively related and shocks to the gold price drive the system. In addition, the gold-oil spread is positively related to U.S. consumer prices, which implies a stronger relationship of consumer prices to the former. Copyright Springer-Verlag Berlin Heidelberg 2013

Suggested Citation

  • Joscha Beckmann & Robert Czudaj, 2013. "Oil and gold price dynamics in a multivariate cointegration framework," International Economics and Economic Policy, Springer, vol. 10(3), pages 453-468, September.
    • Handle: RePEc:kap:iecepo:v:10:y:2013:i:3:p:453-468
    DOI: 10.1007/s10368-013-0237-8
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    More about this item

    Keywords

    Multivariate cointegration; Gold price; Oil price; JEL classification; E31; F31;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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