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Dynamic relationships between the price of oil, gold and financial variables in Japan: a bounds testing approach

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  • Le, Thai-Ha
  • Chang, Youngho

Abstract

This study employs the bounds testing approach to cointegration to investigate the relationships between the prices of two strategic commodities: gold and oil and the financial variables (interest rate, exchange rate and stock price) of Japan – a major oil-consuming and gold-holding country. Our results suggest that the price of gold and stock, among others, can help form expectations of higher inflation over time. In the short run, only gold price impacts the interest rate in Japan. Overall the findings of this study could benefit both the Japanese monetary authority and investors who hold the Japanese yen in their portfolios. For instance, our findings imply that the optimal choice in a long term for those investors who buy the Japanese yen would be to include either gold or oil or both in their portfolios.

Suggested Citation

  • 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.
    • Handle: RePEc:pra:mprapa:33030
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    References listed on IDEAS

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    2. Shahani, Rakesh & Paliwal, Riya, 2020. "An empirical analysis of the Co-movement of Crude, Gold, Rupee-Dollar Exchange rate and Nifty 50 Stock Index during Sub-prime and Coronavirus crisis periods," MPRA Paper 103568, University Library of Munich, Germany.
    3. Mohamed Albaity & Hasan Mustafa, 2018. "International and Macroeconomic Determinants of Oil Price: Evidence from Gulf Cooperation Council Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 8(1), pages 69-81.
    4. Mehmet Balcilar & Zeynel Abidin Ozdemir & Muhammad Shahbaz, 2019. "On the time‐varying links between oil and gold: New insights from the rolling and recursive rolling approaches," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 1047-1065, July.
    5. Haroon Khan, 2015. "The Impact of Oil and Gold Prices on the GDP Growth: Empirical Evidence from a Developing Country," International Journal of Management Science and Business Administration, Inovatus Services Ltd., vol. 1(11), pages 34-46, October.
    6. 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.
    7. Dutta, Srimonti & Ghosh, Dipak & Samanta, Shukla, 2014. "Multifractal detrended cross-correlation analysis of gold price and SENSEX," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 413(C), pages 195-204.
    8. Benlaria Houcine & Gheraia Zouheyr & Belbali Abdessalam & Hadji Youcef & Abdelli Hanane, 2020. "The Relationship Between Crude Oil Prices, EUR/USD Exchange Rate and Gold Prices," International Journal of Energy Economics and Policy, Econjournals, vol. 10(5), pages 234-242.
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    10. Mitra Lal Devkota, 2018. "The Dynamic Causality Between Stock Prices And Macroeconomic Variables: Evidence From Nepal," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 5-14, December.

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    More about this item

    Keywords

    oil price; gold price; interest rate; exchange rate; stock price; bounds test to cointegration;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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