Do gold prices respond to real interest rates? Evidence from the Bayesian Markov switching VECM model
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Abstract
The goal of this paper is to examine the transmission dynamics between the real interest rate and gold prices in the G7. The methodology follows the Bayesian Markov-Switching Vector Error-Correction (MS-VECM) model, along with regime-dependent impulse response functions, spanning the period 1975 to 2016. The findings suggest a positive association between gold prices and real interest rates, with the estimates remaining consistently positive and statistically significant across all G7 countries. The results indicate that gold prices can provide hedging services against real interest rate movements mainly during recessionary times. Our results continue to be robust when we extend the bivariate version of our modeling approach to include more drivers for gold prices.Citation
Apergis, N., Cooray, A., Khraief, N. and Apergis, H. (2018) ‘Do gold prices respond to real interest rates? Evidence from the Bayesian Markov Switching VECM model’. Journal of International Financial Markets, Institutions and Money. DOI: 10.1016/j.intfin.2018.12.014.Publisher
ElsevierJournal
Journal of International Financial Markets, Institutions & MoneyDOI
10.1016/j.intfin.2018.12.014Additional Links
https://www.sciencedirect.com/science/article/pii/S1042443118300167Type
ArticleLanguage
enae974a485f413a2113503eed53cd6c53
10.1016/j.intfin.2018.12.014
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