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Do Exchange Rates Fluctuations Influence Gold Price in G7 Countries? New Insights from a Nonparametric Causality-in-Quantiles Test

Author

Listed:
  • Raza Syed Ali

    (Iqra University Karachi, Pakistan.)

  • Shah Nida

    (Iqra University Karachi, Pakistan.)

  • Ali Muhammad

    (Department of Accounting & Finance, Institute of Business Management Karachi.)

  • Shahbaz Muhammad

    (Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 100081, China.)

Abstract

In the recent era, gold is considered an essential investment source, a source of hedging inflation, and a medium of monetary exchange. The gold and exchange rate nexus become prominent after events like sovereign debt crisis, subprime mortgage crisis, low-interest rate problem, and global financial market solvency. These events attract the attention of researchers and academician for investigating the dynamics of the relationship between gold and exchange rates, and the majority of the studies discusses the linear dynamics, but the non-linear dynamics are ignored. Therefore, the current research investigates the non-linear dynamics of gold price and exchange rate relationship in G7 countries using the new technique named the nonparametric causality approach. This study uses monthly data from the years 1995(January)-2017 (March). The empirical results show that exchange rate return causes gold prices in four out of G7, especially at the low tails. This study also gives valuable insights for monetary policymakers, gold exporter’s international portfolio managers, and hedge fund managers.

Suggested Citation

  • Raza Syed Ali & Shah Nida & Ali Muhammad & Shahbaz Muhammad, 2021. "Do Exchange Rates Fluctuations Influence Gold Price in G7 Countries? New Insights from a Nonparametric Causality-in-Quantiles Test," Zagreb International Review of Economics and Business, Sciendo, vol. 24(2), pages 37-57.
    • Handle: RePEc:vrs:zirebs:v:24:y:2021:i:2:p:37-57:n:1003
    DOI: 10.2478/zireb-2021-0010
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    More about this item

    Keywords

    Gold Prices; Exchange Rates; Non-Parametric Causality Approach; G7 Countries;
    All these keywords.

    JEL classification:

    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • G1 - Financial Economics - - General Financial Markets
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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