Estimating Long-Run Cointegration between Gold Prices and its Determinants

Siddiqi, Umema (2021): Estimating Long-Run Cointegration between Gold Prices and its Determinants.

Abstract

The aim of this paper is to analyse the determinants of gold prices in Pakistan and to deduce long run co-integration between them, if any. The impact of global gold prices, interest rates, foreign exchange rates, silver prices and stock market performance have been measured on the gold prices in Pakistan. The study utilizes annual time series data of the said variables from 1973 to 2015. Different time series econometric techniques, such as the Unit Root Test using Augmented Dickey-Fuller (ADF) test, Johansen Co-integration, Vector Error Correction Model (VECM), and Granger causality test are used to analyse the long-run relationship among variables. The empirical results reveal that global gold prices, foreign exchange rates, and silver prices significantly affect gold prices in the local market. The results also suggest the existence of a long-run co-integration among the variables under study.

• Item Type: MPRA Paper
• Language: English
• Keywords: gold prices; interest rate; foreign exchange rates; cointegration; vecm
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates

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