IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/31795.html
   My bibliography  Save this paper

Oil and gold: correlation or causation?

Author

Listed:
  • Le, Thai-Ha
  • Chang, Youngho

Abstract

This study using the monthly data spanning 1986:01-2011:04 to investigate the relationship between the prices of two strategic commodities: gold and oil. We examine this relationship through the inflation channel and their interaction with the index of the US dollar. We used different oil price proxies for our investigation and found that the impact of oil price on the gold price is not asymmetric but non-linear. Further, results show that there is a long-run relationship existing between the prices of oil and gold. The findings imply that the oil price can be used to predict the gold price.

Suggested Citation

  • Le, Thai-Ha & Chang, Youngho, 2011. "Oil and gold: correlation or causation?," MPRA Paper 31795, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:31795
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/31795/1/MPRA_paper_31795.pdf
    File Function: original version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dirk G. Baur & Brian M. Lucey, 2010. "Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold," The Financial Review, Eastern Finance Association, vol. 45(2), pages 217-229, May.
    2. Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
    3. Narayan, Paresh Kumar & Narayan, Seema & Zheng, Xinwei, 2010. "Gold and oil futures markets: Are markets efficient?," Applied Energy, Elsevier, vol. 87(10), pages 3299-3303, October.
    4. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
    5. Baur, Dirk G. & McDermott, Thomas K., 2010. "Is gold a safe haven? International evidence," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1886-1898, August.
    6. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    7. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    8. Hilde C. Bjørnland, 2009. "Oil Price Shocks And Stock Market Booms In An Oil Exporting Country," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(2), pages 232-254, May.
    9. Soytas, Ugur & Sari, Ramazan & Hammoudeh, Shawkat & Hacihasanoglu, Erk, 2009. "World oil prices, precious metal prices and macroeconomy in Turkey," Energy Policy, Elsevier, vol. 37(12), pages 5557-5566, December.
    10. Hooker, Mark A, 2002. "Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 540-561, May.
    11. Hamilton, James D., 2003. "What is an oil shock?," Journal of Econometrics, Elsevier, vol. 113(2), pages 363-398, April.
    12. Kiseok Lee & Shawn Ni & Ronald A. Ratti, 1995. "Oil Shocks and the Macroeconomy: The Role of Price Variability," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 39-56.
    13. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
    14. Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
    15. Hooker, Mark A., 1996. "This is what happened to the oil price-macroeconomy relationship: Reply," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 221-222, October.
    16. Shawkat Hammoudeh & Ramazan Sari & Bradley T. Ewing, 2009. "Relationships Among Strategic Commodities And With Financial Variables: A New Look," Contemporary Economic Policy, Western Economic Association International, vol. 27(2), pages 251-264, April.
    17. 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.
    18. Wang, Kuan-Min & Lee, Yuan-Ming, 2011. "The yen for gold," Resources Policy, Elsevier, vol. 36(1), pages 39-48, March.
    19. Myeong Hwan Kim & David A. Dilts, 2011. "The Relationship of the value of the Dollar, and the Prices of Gold and Oil: A Tale of Asset Risk," Economics Bulletin, AccessEcon, vol. 31(2), pages 1151-1162.
    20. Sari, Ramazan & Hammoudeh, Shawkat & Soytas, Ugur, 2010. "Dynamics of oil price, precious metal prices, and exchange rate," Energy Economics, Elsevier, vol. 32(2), pages 351-362, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Turhan, M. Ibrahim & Sensoy, Ahmet & Ozturk, Kevser & Hacihasanoglu, Erk, 2014. "A view to the long-run dynamic relationship between crude oil and the major asset classes," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 286-299.
    2. repec:eee:jrpoli:v:52:y:2017:i:c:p:257-265 is not listed on IDEAS
    3. 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.
    4. Shahbaz, Muhammad & Balcilar, Mehmet & Abidin Ozdemir, Zeynel, 2017. "Does oil predict gold? A nonparametric causality-in-quantiles approach," Resources Policy, Elsevier, vol. 52(C), pages 257-265.
    5. repec:eee:jrpoli:v:52:y:2017:i:c:p:358-365 is not listed on IDEAS
    6. Tiwari, Aviral Kumar & Sahadudheen, I., 2015. "Understanding the nexus between oil and gold," Resources Policy, Elsevier, vol. 46(P2), pages 85-91.

    More about this item

    Keywords

    oil price fluctuation; gold price; inflation; US dollar index; cointegration.;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:31795. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.