publication . Preprint . 2012

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

Joscha Beckmann; Robert Czudaj;
Open Access
  • Published: 01 Aug 2012
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: Cointegration; gold price; inflation hedge; Markov-switching error correction, jel:C32, jel:E31, jel:E44
82 references, page 1 of 6

Ang, A. and G. Bekaert (2002): Regime Switches in Interest Rates. Journal of Business & Economic Statistics, 20(2), 163-182.

Ariovich, G. (1983): The Impact of Political Tension on the Price of Gold. Journal for Studies in Economics and Econometrics, 16(1), 17-37.

Baker, S.A. and R.C. van Tassel (1985): Forecasting the Price of Gold: A Fundamentalist Approach. Atlantic Economic Journal, 13(4), 43-51.

Balke, N.S. and T.B. Fomby (1997): Threshold Cointegration. International Economic Review, 38(3), 627-645. [OpenAIRE]

Basu, S. and M.L. Clouse (1993): A Comparative Analysis of Gold Market Efficiency Using Derivative Market Information. Resources Policy, 19(3), 217-224.

Baur, D.G. and B.M. Lucey (2010): Is Gold a Hedge or a Safe Haven? An Analysis of Stocks, Bonds and Gold. The Financial Review, 45(2), 217-229.

Baur, D.G. and T.K. McDermott (2010): Is Gold a Safe Haven? International Evidence. Journal of Banking & Finance, 34(8), 1886-1898.

Bialkowski, J.T., M.T. Bohl, P.M. Stephan and T.P. Wisniewski (2011): Is There a Speculative Bubble in the Price of Gold? Available from SSRN: http://ssrn.com/abstract=1718106.

Blose, L.E. (2010): Gold Prices, Cost of Carry, and Expected Inflation. Journal of Economics and Business, 62(1), 35-47. [OpenAIRE]

Bodie, Z. (1976): Common Stocks as a Hedge against Inflation. Journal of Finance, 31(2), 459-470. [OpenAIRE]

Capie, F., T.C. Mills and G. Wood (2005): Gold as a Hedge Against the Dollar. Journal of International Financial Markets, Institutions and Money, 15(4), 343-352. [OpenAIRE]

Cecchetti, S.G., R.S. Chu and C. Steindel (2000): The Unreliability of Inflation Indicators. Current Issues in Economics & Finance, 6(4), 1-6.

Chappell, D. and K. Dowd (1997): A Simple Model of the Gold Standard. Journal of Money, Credit and Banking, 29(1), 94-105.

Chua, J., G. Stick and R. Woodward (1990): Diversifying with Gold Stocks. Financial Analysts Journal, 46(4), 76-79.

Ciner, C. (2001): On the Long Run Relationship between Gold and Silver: A Note. Global Finance Journal, 12(2), 299-303. [OpenAIRE]

82 references, page 1 of 6
Powered by OpenAIRE Open Research Graph
Any information missing or wrong?Report an Issue