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The relationship between the prices of gold and oil and macroeconomic variables: Malaysian evidence

Author

Listed:
  • Abidin, Tengku
  • Masih, Mansur

Abstract

This paper attempts to find out the relationship between the prices of gold and oil and macro-economic variables. The methods applied are the standard time series techniques which involve testing their theoretical relationship and discerning their causality. Malaysia is taken as a case study. The findings revealed that in Malaysia, gold plays an important role leading the oil price and selected macro-economic variables. Oil is not regarded as a major determinant that influences the economy because it is heavily subsidized by the government. Oil price is driven by gold and inflation rate and followed by exchange rate and stock markets. Therefore, as per our findings, movement of gold price becomes the most important focus for the policy makers.

Suggested Citation

  • Abidin, Tengku & Masih, Mansur, 2016. "The relationship between the prices of gold and oil and macroeconomic variables: Malaysian evidence," MPRA Paper 110326, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:110326
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    References listed on IDEAS

    as
    1. Le, Thai-Ha & Chang, Youngho, 2011. "Dynamic relationships between the price of oil, gold and financial variables in Japan: a bounds testing approach," MPRA Paper 33030, University Library of Munich, Germany.
    2. Robert Engle & Clive Granger, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    3. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    4. Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "The crude oil market and the gold market: Evidence for cointegration, causality and price discovery," Resources Policy, Elsevier, vol. 35(3), pages 168-177, September.
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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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