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The Dynamic Linkages among Gold Prices, Stock Prices, the Exchange Rate and Interest Rate in South Africa

Author

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  • Thabang NDLOVU
  • Nozibusiso Mavuso NDLOVU

    (Competition Commission South Africa
    Competition Commission South Africa)

Abstract

The fundamental aim of this study is to examine the intricate interplay among gold prices, interest rates, exchange rates, and stock price indices within the context of South Africa. To achieve this, both a conventional Vector Autoregression Model and a Bayesian Vector Autoregression Model were applied to monthly data spanning from June 1995 to December 2022. The findings indicate that a positive shock in stock prices triggers positive reactions in exchange rates, gold prices, and interest rates. Conversely, a positive shock in interest rates induces negative reactions in both gold prices and stock prices. Moreover, a positive shock in gold prices elicits negative responses in both interest rates and stock prices. Additionally, a positive shock in exchange rates prompts positive reactions in gold prices and interest rates, while simultaneously resulting in a negative response in stock prices.

Suggested Citation

  • Thabang NDLOVU & Nozibusiso Mavuso NDLOVU, 2024. "The Dynamic Linkages among Gold Prices, Stock Prices, the Exchange Rate and Interest Rate in South Africa," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 8(1), pages 35-56.
    • Handle: RePEc:trp:01jefa:jefa0070
    DOI: 10.1991/jefa.v8i1.a65
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    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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