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Title: Gold and oil prices: stable or unstable long-run relationship
Authors: Bassil, Charbel
Hamadi, Hassan
Mardini, Patrick 
Affiliations: Department of Economics 
Keywords: Oil prices
Gold prices
Structural breaks
Unit root
Subjects: Cointegration
Issue Date: 2019
Part of: Journal of economics and finance
Volume: 43
Start page: 57
End page: 72
This paper investigates the presence of a long-run relationship between the daily prices of oil and gold over the period 1986-2015. The presence of such a long-run relationship implies that the two markets are jointly inefficient; and that one price can be used as a predictor for the other price. We also test the presence of one or multiple structural breaks in the long-run relation. The presence of structural breaks suggests that the magnitude and the sign of the relationship between oil and gold prices may be different across different regimes. Our methodology is based on endogenous structural break tests and tests of cointegration with one or multiple breaks. Our results show that indeed this relation has changed over time and is subject to two or five regime changes. However, we do not find evidence for cointegration with or without breaks. The absence of a long-run equilibrium between oil and gold prices suggest that oil prices are biased predictor of gold prices. Hence, past information of oil prices is not relevant in forecasting gold prices.
Ezproxy URL: Link to full text
Type: Journal Article
Appears in Collections:Department of Economics

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