Abstract
This paper examines the short and long term relationship between stocks, bonds, consumer price index (CPI) and production index (PI) by using monthly data from January 2003 to December 2011. First, the dependence of gold return with stock return, bond return and CPI based and PI based inflation is tested by using regression analysis. Second, ADF test is applied to test whether the series are stationary and then Engle-Granger cointegration, Granger causality and Johansen cointegration analysis are applied. Cointegration analysis indicates that series are integrated and there exist a long term relationship between these variables. Since the series are cointegrated, the error correction model (VECM) is applied to see the short-run dynamics. According to regression analysis test results,there is significant negative relation with stocks and positive relation with PI based inflation.
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