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The relationship between the prices of gold and oil and macroeconomic variables: Malaysian evidence

Abidin, Tengku and Masih, Mansur (2016): The relationship between the prices of gold and oil and macroeconomic variables: Malaysian evidence.

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Abstract

This paper attempts to find out the relationship between the prices of gold and oil and macro-economic variables. The methods applied are the standard time series techniques which involve testing their theoretical relationship and discerning their causality. Malaysia is taken as a case study. The findings revealed that in Malaysia, gold plays an important role leading the oil price and selected macro-economic variables. Oil is not regarded as a major determinant that influences the economy because it is heavily subsidized by the government. Oil price is driven by gold and inflation rate and followed by exchange rate and stock markets. Therefore, as per our findings, movement of gold price becomes the most important focus for the policy makers.

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