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
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...
free text keywords: Cointegration; gold price; inflation hedge; Markov-switching error correction, jel:C32, jel:E31, jel:E44
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