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On the relationship between oil and gold before and after financial crisis: Linear, nonlinear and time-varying causality testing

Listed author(s):
  • G. Bampinas

    ()

    (Department of Economics, University of Macedonia, Greece)

  • T. Panagiotidis

    ()

    (Department of Economics, University of Macedonia, Greece; The Rimini Centre for Economic Analysis, Italy)

We examine the causal relationship between crude oil and gold spot prices before and after the recent financial crisis. In the pre-crisis period, causality is linear and unidirectional, running from oil to gold. In the post-crisis period, a bidirectional nonlinear causality relationship emerges. Volatility spillover transpires as the source of nonlinearity during this period. The time path of the causal linkages both for the returns and the levels (cointegration) was assessed via dynamic bootstrap causality analysis. We find that the causal linkage from gold to oil is time dependent and that the non-Granger causality null hypothesis rejection rate increased considerably in the post-financial crisis period. The probability of gold Granger causing oil in the short-run increases by more than 30% during the recent financial and Euro crisis.

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Paper provided by The Rimini Centre for Economic Analysis in its series Working Paper Series with number 15-04.

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Date of creation: Feb 2015
Handle: RePEc:rim:rimwps:15-04
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