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Is Gold a Hedge Against Turkish Lira?

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  • Ozturk Feride

    (Department of Economics, Dunlupinar University, Tavsanli Yolu 10.Km, Kutahya, Turkey)

  • Acikalin Sezgin

    (Department of Economics, Dunlupinar University, Tavsanli Yolu 10.Km, Kutahya, Turkey)

Abstract

This paper investigates whether gold is an internal hedge and/or an external hedge against Turkish lira (TL) by using monthly data from January 1995 to November 2006. Cointegration test results confirm the long-term relationships between the gold price and consumer price index and between the gold price and TL/US dollar exchange rate. The Granger Tests, based on vector error correction model (VECM), indicate that gold price Granger causes the consumer price index and TL/US dollar exchange rate in a unidirectional way. It is concluded that gold acts as an effective hedge against potential future TL depreciation and rising domestic inflation. Furthermore, gold price may be considered as a good indicator of inflation and hence it can be used as a guide to monetary policy.

Suggested Citation

  • Ozturk Feride & Acikalin Sezgin, 2008. "Is Gold a Hedge Against Turkish Lira?," South East European Journal of Economics and Business, Sciendo, vol. 3(1), pages 35-40, April.
    • Handle: RePEc:vrs:seejeb:v:3:y:2008:i:1:p:35-40:n:4
    DOI: 10.2478/v10033-008-0004-x
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    Cited by:

    1. O'Connor, Fergal A. & Lucey, Brian M. & Batten, Jonathan A. & Baur, Dirk G., 2015. "The financial economics of gold — A survey," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 186-205.
    2. Paul, Manas & Bhanja, Niyati & Dar, Arif Billah, 2019. "Gold, gold mining stocks and equities- partial wavelet coherence evidence from developed countries," Resources Policy, Elsevier, vol. 62(C), pages 378-384.
    3. Mirza Muhammad Naseer & Muhammad Asif Khan & József Popp & Judit Oláh, 2021. "Firm, Industry and Macroeconomics Dynamics of Stock Returns: A Case of Pakistan Non-Financial Sector," JRFM, MDPI, vol. 14(5), pages 1-18, April.
    4. Brian M. Lucey & Maurice Peat & Aleksandar Šević & Samuel A. Vigne, 2021. "What is the optimal weight for gold in a portfolio?," Annals of Operations Research, Springer, vol. 297(1), pages 277-291, February.

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