publication . Research . Preprint . 2012

Gold as an Infl ation Hedge in a Time-Varying Coefficient Framework

Beckmann, Joscha; Czudaj, Robert;
Open Access
  • Published: 01 Jan 2012
  • Publisher: Essen: Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI)
Abstract
This study analyzes the question whether gold provides the ability of hedging against inflation from a new perspective. Using data for four major economies, namely the USA, the UK, the Euro Area, and Japan, we allow for nonlinearity and discriminate between long-run and time-varying short-run dynamics. Thus, we conduct a Markov-switching vector error correction model (MS-VECM) approach for a sample period ranging from January 1970 to December 2011. Our main findings are threefold: First, we show that gold is partially able to hedge future inflation in the long-run and this ability is stronger for the USA and the UK compared to Japan and the Euro Area. In additio...
Subjects
free text keywords: E31, C32, E44, Cointegration, Cointegration,gold price,inflation hedge,Markov-switching error correction, gold price, inflation hedge, Markov-switching error correction, jel:E31, jel:C32, jel:E44, ddc:330
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publication . Research . Preprint . 2012

Gold as an Infl ation Hedge in a Time-Varying Coefficient Framework

Beckmann, Joscha; Czudaj, Robert;