Abstract
Previous studies have reported that there is a relationship among gold and oil prices. This research analyses how gold and oil prices variables interact focusing on different Global financial crisis (GFC) phases, we adopt a multivariate asymmetric dynamic conditional correlation GARCH framework, during the period spanning from January 1 st , 2000 until December 31 th , 2017. Our empirical results suggest correlations’ asymmetric responses among them. Moreover, the results indicate a correlations increase of gold and oil, during the crisis periods, suggesting different prices vulnerability. JEL classification numbers: E3 D4 Keywords: DCC-FIAPARCH model, Global financial crisis, Volatility DOI : 10.7176/JETP/9-7-01 Publication date :October 31 st 2019
Highlights
Dynamic analysis of precious commodity such as gold and oil has received a lot of financial time series experts’ attention, especially when research focuses on their prices multivariate analysis
Analysts growing interest is due to the fact that oil prices increase or gold prices increase often pushes inflation rate on the rise, which increases gold demand and as a result jacked up its prices on the market (Zhang and Wei, 2010)
Oil prices have been considered as a major indicator in the global economy (Norden Amano, 1998)
Summary
Dynamic analysis of precious commodity such as gold and oil has received a lot of financial time series experts’ attention, especially when research focuses on their prices multivariate analysis. Gold and oil multivariate analysis results will get so considerable interest of investors and financial analysts. The causal linkages time path for both returns and levels (cointegration) assessed via dynamic bootstrap causality analysis Their results found that the causal linkage from gold to oil is time dependent and that the non-Granger causality null hypothesis rejection rate increased considerably in the post-financial crisis period. The probability of gold Granger causing oil in the short-run, increased by further than 30% throughout the recent financial and euro crisis. Mo, He and Jiang (2017) examined the dynamic linkages among gold prices, US dollars and crude oil market and found that the dynamic gold-oil relationship is always positive. Sephton and Mann (2018) examined how a shock to oil prices disturbs gold prices, with the impacts exposed to depend on mutually the shock size and the region within which the system lies when the shock had occurred
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