Original scientific paper
https://doi.org/10.2478/zireb-2021-0010
Do Exchange Rates Fluctuations Influence Gold Price in G7 Countries? New Insights from a Nonparametric Causality-in-Quantiles Test
Syed Ali Raza
orcid.org/0000-0002-0245-6277
; Iqra University Karachi, PAKISTAN
Nida Shah
; Iqra University Karachi, PAKISTAN
Muhammad Ali
; Department of Accounting & Finance, Institute of Business Management, Karachi
Muhammad Shahbaz
; Center for Energy and Environmental Policy Research, Beijing Institute of Technology, Beijing, 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.
Keywords
Gold Prices; Exchange Rates; Non-Parametric Causality Approach; G7 Countries
Hrčak ID:
265781
URI
Publication date:
15.11.2021.
Visits: 1.332 *