Impulse Response Function Analysis Research Articles

Impact of capital controls on banking crises and economic growth

This study examines the expected impact of capital control tools on financial stability. We demonstrate that capital controls lower the probability of a banking crisis (positive effect) and simultaneously reduce economic growth (negative effect). We apply a dynamic panel logit model with fixed effects on a sample of countries composed of emerging and advanced economies for the period 2000–2020. Moreover, we use an impulse response function analysis to assess the net effect of capital controls. The results show that while regulation of capital flows directly stabilizes the economy, it also indirectly destabilizes it by impeding economic growth. Furthermore, we found that the positive impact of lowering the probability of a crisis dominates the adverse effect on economic growth. These impacts are different across the subgroups of emerging market economies and advanced countries. However, in both subgroups the effect of capital controls is independent of capital controls tightening. These results have significant implications for policymakers, who must adjust the capital flows regulatory policy according to economic growth and financial stability objectives.

Dynamic Effects Of Interaction Between Economic Growth, Investment And Savings With International Trade In Indonesia

Anticipation of economic uncertainty needs to be done to avoid the brink of crisis by maintaining the pace of economic growth, investment and savings climate as well as smooth international trade. This study aims to analyze and explore the dynamic relationship interaction between economic growth variables projected as Gross Domestic Product (GDP), investment, gross domestic savings and international trade of the Indonesian state with data in the period 1971-2020 obtained from the worldbank.org website. The research method uses the Vector Auto Regression (VAR) analysis model with the development of Impulse Response Function (IRF) and Variance Decomposition (VDC) analysis to explain the response of a variable to the shock of the variable itself and other variables. The results of the analysis revealed that the one-way relationship for the variables of investing, saving, and trading was influenced by the variable itself with a lag of one. In addition, the results of IRF analysis show that the variable response of economic growth, investment, savings and international trade is dominated by shocks to economic growth variables, and the results of VDC analysis show that economic growth variables most contribute to the variable response of economic growth itself, investment, savings and international trade. The results of this study can be used as a reference for the formulation of anticipatory policies by the government and Bank Indonesia in preventing the risk of economic crisis by maintaining macroeconomic variable stability so that the level of domestic market confidence is maintained in the outlook. Therefore, the policy stages that can be carried out are to control inflation, reduce the current account deficit, maintain fiscal balance and improve in managing foreign debt.

Nexus between financial inclusion and Islamic financing distribution: Evidence from Indonesian MSMEs

Purpose – The purpose of this study is to investigate the relationship between financial inclusion and the distribution of Islamic banking financing to Indonesia's MSME industry.Methodology – This study utilizes the Vector Error Correction Model (VECM) approach covering the period between 2015 to 2020.Findings – The study's findings suggest that the use of all-inclusive financial variables, as represented by the number of ATMs, branch offices, and Third-Party Fund (TPF), has a significant effect on the distribution of financing in the short-term but not in the long term. Furthermore, macroeconomic as well as internal control variables, such as inflation and Non-Performing Financing, have been shown to have a significant influence. The impulse-response function analysis shows that the financing distribution responds positively to financial inclusion variables such as ATMs and branch offices. TPF, inflation, ROA, and exchange rate variables were found to have negative responses in the case of a shock.Implications – The findings of this study are expected to be used as a basis to develop government policies, particularly in supporting the post-COVID-19 national economic recovery through a comprehensive financial program that can broaden access to financing from Islamic banks for the general public, particularly MSME actors who have been severely impacted by the COVID-19 pandemic.Originality – This investigation utilizes three distinct indicators to assess the relationship between Islamic financing distribution in Islamic banking and financial inclusion for MSMEs. These include measures of financial inclusion, financial performance metrics of Islamic banking institutions, and macroeconomic variables.

The Validity of the Bank Credit Channel in the Monetary Transmission Mechanism: VAR Analysis of Participation Banks

The relationship between Islamic banking and monetary policies, and the way this relationship is reflected in the real sector has attracted increasing attention, primarily because of the growing importance of Islamic banking activities. Therefore, a review of the effectiveness of the loan schemes of Islamic banks in Turkey can make a significant contribution to the literature. This study analyzes whether the loan schemes of public and private participation banks operating in Turkey’s dual banking system, are effective. To this end, the study relies on variance decomposition and impulse response function analyses of VAR models compiled from monthly data between 2009:01 and 2020:03. The industrial production index represents economic activity, the interest rate applied to consumer loans, and the total money supply (M1), representing the monetary policy instruments. The model also includes total loans and deposit variables made available for the participation banks, representing the bank loan scheme and other variables, including the nominal exchange rate and consumer price indexes. The study measures the responses of the exchange rate, inflation rate, industrial production index, participation banks’ total loans, and total deposits to one-unit shocks applied to monetary policy and interest rates. The findings from the impulse-response functions indicate that the credit channel in participation banks is partially additional since their total loans and deposits react to monetary policies in certain periods due to changes in money supply and interest rates. However, they cannot reflect this at the production level.

Charting the Course for Sustainable Aging: Socio-Environmental and Economic Impacts on Djiboutian Elderly Population

Abstract The aging population has become a crucial demographic trend worldwide, as it poses both economic and sustainable challenges to governments and societies. And, ostensibly, this unprecedented increase in the senior demographic is currently unfolding in East African nations, primarily, due to substantial advancements in the healthcare system and the commendable support and promotion of education within the region. In this context, the current article examines the relationship between the aging population, ecological footprint, consumption of renewable energy, governmental healthcare expenditures, trade, and urbanization within the context of the Republic of Djibouti. To investigate the data and explore the dynamics and interactions among variables, a comprehensive approach was employed, which involved utilizing an autoregressive distributed lag (ARDL) model, a Granger causality test, and both an impulse response function (IRF) and variance decomposition (VD) analyses. According to the ARDL findings, urbanization has a positive relationship with an aging population. In contrast, the health sector expenditures demonstrated a negative association with the elderly population in Djibouti. This indicates an alarming scenario where government spending on elderly care fails to effectively meet the specific needs of seniors due to insufficient funding, bureaucratic inefficiencies, and inadequate program implementation. Consequently, this leads to a significant gap in coverage for a large portion of the elderly population. On the other hand, it is worth noting that the well-being of the elderly population in Djibouti sees only a slight improvement influenced by the trade performance variable. Nonetheless, this positive impact is somewhat hindered by the lack of sufficient financial inclusion measures that should have ideally been driven by trade-related activities. Moreover, the study’s IRF and VR highlight a positive shock between the consumption of renewable energy and the well-being of the elderly population. Nevertheless, it is of utmost importance to recognize the detrimental impact of the ecological footprint, which significantly undermines the overall well-being of the aging population. Therefore, policymakers must carefully weigh and benefit the simultaneous effect of the advantages of renewable energy consumption on the environment, and on the well-being of the elderly population. It is also essential to emphasize the need to devise more inclusive policies that can comprehensively address this issue and improve the welfare of the elderly demographic.

How does tourism affect the urban heat island effect? A case study of the tourism heat footprint in Macao.

This paper uses the tourism heat footprint (THF) and a structural vector autoregressive model to investigate how tourism has affected the urban heat island effect in Macao, a typical urban tourism destination. The dynamic relationships between the THF, heat island intensity (HII), and quarterly average temperature (QAT) are investigated. The impulse response function and variance decomposition analysis are used to assess if a long-term causal relationship exists between the three indicators. The results show the following. (1) The hotel industry in Macao is the source of energy consumption and heat release. (2) A Granger causality relationship exists between the THF and QAT but not between the THF and HII. (3) The interaction effect between the growth rate of the THF and QAT is manifested as shocks with the same frequency and regular periodic fluctuations. (4) The heat island effect of this tourism destination is reflected in an increase in local temperature due to the energy consumption and heat release by tourists. Based on the results, policy implications for a sustainable tourism city are provided.

Vector Autoregressive (VAR) Method in Analyzing the Effect of Inflation on Food Price Volatility (FPV) in Palopo City, Indonesia

Purpose: This study aimed to analyze the effect of Inflation on food prices in Palopo City, where the inflation rate is calculated based on index numbers collected from several commodities traded at each price level in the market, namely the Consumer Price Index (CPI). Theoretical framework: The Vector Autoregressive (VAR) method is simultaneous equation modeling that has several endogenous variables simultaneously, but each endogenous variable is explained by lags of its own value and other endogenous variables in the model. Forecasting using the VAR method is in some cases better than complex simultaneous equations. Design/methodology/approach: The stationarity test in this study uses the Augmented Dickey-Fuller (ADF) method, followed by determining lag optimal Akaike Information Criteria (AIC) and Schwarz information Criterion (SC) analysis. The stability test of the VAR model was carried out through the Johansen Cointegration Test at a 5% significance level which produced six equations with a trace statistically more significant than the critical value. Then an analysis of Impulse Response Functions (IRF) was carried out to see the dynamic response of the CPI variable to food commodity prices. The data used are time series for January 2018 to December 2020. Findings: The inflation response to food price fluctuations in Palopo City resulted in three conditions. The Palopo City CPI responded positively to the price fluctuations of garlic and red chili. In contrast, shallots and chicken meat price fluctuations responded negatively to the Palopo City CPI. The Palopo City CPI did not permanently affect the price fluctuations of cayenne pepper and chicken eggs. Research, Practical & Social implications: The practical implication of this research is that food commodity prices still have an influence on inflation movements. Local governments should cooperate with city governments in the production of food commodities by implementing cropping patterns on these commodities to overcome excess production, and it is necessary to carry out off-season production to achieve harvest deficits so that prices remain stable. Improvements to the trade system also need to be improved in addition to the production system. This is intended so that the distribution of food commodity products can be more efficient by implementing supply chain management. Originality/value: Collecting time series data of the Consumer Price Index (CPI) for 6 commodities, namely shallots, garlic, chili peppers, cayenne pepper, broiler meat, and broiler eggs, in a modern model, namely a multivariate time series model with a high level of predictive accuracy of the model among these variables to predict and analyze the effects among these series and estimate the interactions among these series with the latest data is the value of this research, and then provide recommendations for the government in making economic strategies, especially for those related to inflation and food prices.

Rural Financial of Rural Revitalization Support on Farmers' Income: An Empirical Study from Anhui Province, China

Under the background of rural revitalization, rural finance is the driving force to promote rural economic development and the pillar to achieve the strategic goal of rural revitalization. The VAR model of the relationship between farmers' income growth rate and rural financial support, rural financial support and industrial structure was constructed, taking the rural financial data of Anhui Province from 1999 to 2017 as samples. And the impulse response function and variance decomposition analysis were conducted. The empirical results show that the growth rate of farmers' income is greatly affected by rural financial support policies.

Specifics of the impact of the Bank of Russia's monetary policy on the economies of the Eurasian Economic Union

The article is a part of the author's (Zagoytiy V.L.) dissertation research. The purpose of this paper is to identify the key effects of the Bank of Russia's monetary policy on the economies of the Eurasian Economic Union. The authors' initial assumption is that the monetary policy shock of the Russian economy has the same effect on the economies of the other member states of the Eurasian Economic Union. The conclusions about the response of macroeconomic variables to economic policy shocks are based on impulse response function analysis. The authors conduct their modelling in two stages. In the first stage, we identify monetary policy shock for the Russian economy by constructing a vector autoregression model using standard Kholetsky decomposition. At the second stage, we analyze the impact of a Russian monetary policy shock on the economies of the EEU member states. The impact of this shock on the main macroeconomic indicators of the countries of the Eurasian Economic Union has been estimated using O. Jorda's local projections’ method. The analysis reveals the significant impact of the monetary policy of the Bank of Russia on the economies of Armenia and Belarus in the short term. The initial assumption that monetary policy shock of Russian economy has the same impact on the economies of other member states of the Eurasian Economic Union is disproved. The authors conclude that the monetary policy shock of the Bank of Russia is transmitted to the economies of the Eurasian Economic Union partner countries primarily through money markets, leading to an increase in market interest rates in Armenia and Belarus and, consequently, to a decline in industrial production. This reflects the operation of the currency channel of cross-border transmission of monetary policy, whereby a rate hike in a large regional economy triggers a rate hike in the region in order to prevent depreciation of national currencies

Asymmetric Exchange Rate Pass Through to Consumer Prices: Evidence from Zambia

The purpose of this study was to examine the asymmetric exchange rate pass through (ERPT) to consumer price inflation in Zambia. We examined ERPT to consumer price inflation arising from kwacha depreciation and appreciation for the period between the first quarter of 1985 to the fourth quarter of 2017. We employed the structural vector autoregressive model. The results showed that ERPT to consumer price inflation is incomplete and asymmetric. Consumer prices in Zambia are more responsive to kwacha depreciation than to appreciation. The depreciation of the kwacha has a greater significant impact on consumer prices than the appreciation of the kwacha. The impulse response function analysis showed that the shock to kwacha depreciation is very persistent than that of kwacha appreciation. Finally, the forecast error variance decomposition showed that a depreciation shock explains a bigger portion of the variance in consumer price inflation than an appreciation shock. These findings show that kwacha depreciation and appreciation have different effects on consumer price inflation, thereby confirming the presence of asymmetries in the ERPT. The study also accounted for the effect of commodity price booms in influencing ERPT. However, results of ERPT did not change much with the inclusion of commodity price booms. JEL Codes: E31, F31

Workers' remittances and economic growth: new evidence from an ARDL bounds cointegration approach for Sri Lanka

PurposeThe objective of this study is to examine the long-run relationship between workers' remittances and economic growth in Sri Lanka using time series data spanning 1975–2021.Design/methodology/approachThis study employed both exploratory data analysis (EDA) and inferential data analysis (IDA) tools. EDA includes the scatter plots, confidence ellipse with Kernel fit, whereas IDA covers unit root test, the autoregressive distributed lag (ARDL) bounds technique, the Granger's causality test, and impulse response function (IRF) analysis.FindingsEDA confirms that workers' remittances have a positive relationship with per-capita gross domestic product (GDP). All variables used in this study are I(1). This study is exhibited that workers' remittances have a positive long-run relationship with per-capita GDP. The estimated coefficient of the error correction term shows that the dependent variable moves towards the long-run equilibrium path. Workers' remittances have a short-run and long-run causal relationship with per-capita GDP. The IRF analysis indicates that a one standard deviation shock to workers' remittances has initially an immediate significant positive impact on economic growth.Practical implicationsThis study provides insights into workers' remittances in economic growth in Sri Lanka. Further, the findings of this study also provide evidence that workers' remittances increase economic growth.Originality/valueUsing ARDL bounds test, Granger's Causality test and IRF analysis for examining the relationship between workers' remittances and economic growth are the originality of this study.

Two theories of endogenous money: an empirical study of Korea

This study tests Korea’s two endogenous money supply channels: the accommodationist and structuralist channels. The main analytic tools are the Fully Modified OLS, Maki’s structural break test, Error Correction Model, and Impulse Response Function (IRF) analysis. The primary purpose of this study is to propose analytical methods to compare the two endogenous money supply channels. The analytic models also consider the impact of fiscal policy and the current account balance on reserves. The test results reveal a unilateral causality from loan to reserve and a bilateral causal relationship between loan/reserve and Lf/deposit ratio. These results suggest that both accommodationist and structuralist channels coexist in Korea. However, the structuralist channel explains a relatively small portion of the endogenous money supply process. The IRF analysis does not provide evidence for the pressure on the interest rate spread exerted by financial institutions’ portfolio adjustment. This result can be attributed mainly to the central bank’s growing accommodative attitude toward the reserve demand.

How Does Credit Default Swap Premiums Affect the Turkish Financial Markets

One of the most important risks of today's financial markets is credit risk. Credit risk is very important for investors investing in international markets, and therefore it is vital to manage credit risk correctly. Credit Default Swaps (CDS) are at the forefront of the most important financial products that ensure the elimination of credit risk. In this study, the relationship between 5-Year Turkey CDS premium, which is an important indicator for investors, Turkish Borsa Istanbul (BIST) 100 Index, USDTRY foreign exchange rates and 2-Year Turkish benchmark bonds interest rates are examined. For this purpose, econometric analysis was applied using CDS premium, BIST 100 index, USDTRY and 2-Year Turkish benchmark bonds interest rate data, which consists of 2921 daily observations from 10 March 2010 to 08 March 2022. Augmented Dickey-Fuller and Phillips-Perron root tests are used to determine the stationarity of the variables. Then, the Granger Causality test, Impulse-Response Function and Variance Decomposition Analysis are used. According to the results of the study; a bilateral causality relationship was determined between CDS premiums and BIST 100 index, USDTRY exchange rate and benchmark bond interest rates. According to the Impulse-Response functions analysis, a 1% increase in CDS premium prices increases the USDTRY rate and benchmark bond interest rates, while lowering the BIST 100 index.

Political and productive capacity characteristics as outward foreign direct investment push factors from BRICS countries

This paper investigates the primary push factors that constitute home country-specific characteristics of Brazil, Russia, India, China, and South Africa (BRICS) and enhance their abilities as emerging market economies to engage in outward foreign direct investments (OFDI). The motivation behind this study was the need to fill the gap in the existing literature on the push factors from BRICS. A panel autoregressive distributed lag model was employed on these countries from 2000 to 2018, followed by an impulse response function analysis using a unique data set from a productive capacity index (PCI) and a derived index obtained from each country’s political risk ranking. A robust relationship was detected between OFDI and all of its short- and long-term push factors. The results reveal the relative strength of the long-term impact of the productive capacity and political stability indices supported by the divergent effect of their shocks on OFDI. This substantial contribution highlights the policy implication of how governments should promote their productive capacity and political stability to sustain a healthy investment environment for firms to expand their investments abroad.

Land-use and food security in energy transition: Role of food supply

Food security in a just energy transition is a growing debate about designing sustainable food secure networks worldwide. Energy transition, land-use change, and food security are crucial factors for food security and provision. The increased demand for food products and customer preferences regarding food safety provide various issues for the current agriculture food supply chain (AFSC). Along with rising sustainability concerns, strict government regulation, food security, and traceability concerns compel managers, business houses, and practitioners working in AFSC to adopt new tools, techniques, and methodologies to model current food supply chain problems. Thus, in turn, design the food logistics network for food security. Hence, this study investigates the core determinants of food security and supply in Egypt, Morocco, Tunisia, and Lebanon over the period of 2010–2019. In order to estimate the objectives of the study, we employ the fully modified ordinary least square (FMOLS) and dynamic ordinary least squares estimators (DOLS) to draw the study findings. However, the estimated results show a negative association of land use with food security and supply. Likewise, energy transition, gross domestic product, and agricultural value added (AVA) contribute to the food security supply. In contrast, urbanization's negative but insignificant contribution to the food supply in selected economies exists. Besides, another core objective of the study is to investigate the moderate role of the energy transition on the gross domestic product, agriculture sector, and land use and find the significant contribution to the food supply. However, the current study also tries forecasting for the next 10 years and employs the impulse response function (IRF) and variance decomposition analysis (VDA). Congruently, this study uses the pairwise panel causality test and finds exciting outcomes. The COVID-19 crisis has posed challenges such as energy consumption and food security issues. On behalf of the results, the current study proposes imperative policies to investigate the desired level of food supply. The findings provide valuable insights for experts, policymakers, and officials to take practical measures for energy use and food security challenges.

The gold price – Inflation relation in the case of Vietnam: empirical investigation in the presence of structural breaks

Purpose This paper investigates the relationship between domestic gold prices and inflation in Vietnam based on the monthly series of the gold price index and consumer price index over the period of December 2001–July 2020. Design/methodology/approach The co-integration between the domestic gold price and inflation is examined within the autoregressive distributed lag-error correction (ARDL bounds testing) framework. This paper also applies the vector error correction model (VECM) and impulse response function analysis to explore the causal relationship between these two variables. Moreover, since both gold and inflation series are likely to have structural changes over time, a unit root test controlling for significant breaks is employed in this paper. Findings Findings from the ARDL bounds testing model suggest the presence of a co-integration between the underlying variables. The VECM indicates that shocks in inflation lead to a negative response to gold prices in the long run. In the short term, only fluctuations in gold prices impact inflation, and this causality is unidirectional. Research limitations/implications Gold is regarded as a critical financial asset to preserve wealth from inflation pressure in the case of Vietnam. These findings propose implications for both investors and policymakers. Originality/value Empirical results suggest that inflation has a long-term impact on gold prices in the Vietnamese market. In the existence of a permanent inflationary shock, domestic prices of gold respond negatively to this shock; hence, gold can act as a good hedge against inflation in Vietnam.

The Effectiveness Of The Exchange Rate on The Amount of Foreign Exchange Reserves in Indonesia

This study aims to analyze the interaction variables of fiscal transfer policy variables. (Foreign Exchange Reserves, Imports, Exports, Exchange Rates and GDP). This study uses secondary data or from 2000 - 2019. The data analysis model in this study uses the Vector Autoregression (VAR) model and is sharpened by Impulse Response Function (IRF) Analysis, Forecast Error Variance Decomposition (FEVD). The results of the VAR analysis show that previously (t – p) contributed to the current variable, both alone and to other variables. The results of the FEVD analysis show that all variables have a major contribution to the variables themselves in the short, medium and long term, namely Foreign Exchange Reserves, Imports, Exports, Exchange Rates and GDP. The results of the analysis of each variable of monetary policy transmission and the effectiveness of the Exchange Rate on Reserves Short, medium and longterm exchange rates show that policy transmission can maintain the Indonesian economy

팬데믹 위기가 세계 자본시장 동조화에 미치는 영향

Purpose - The main purpose of this study is to widely investigate the impact of recent pandemic crises on the synchronization of the world capital markets through 25 stock indices from major developed countries. Design/methodology/approach - This study collects 25 stock indices from major developed countries and the time period is between January 5, 2001 and February 24, 2022. The data sets used in the study include finance.yahoo.com and Investing.com.. The Granger causality analysis, unit-root test, VAR analysis, and forecasting error variance decomposition were hired in order to analyze the data. Findings - First, there are significant inter-relations among 25 countries around recent major pandemic crises(such as SARS, A(H1N1), MERS, and COVID19), which is consistent result with previous literature. Second, COVID19 shows much stronger impact on the world-wide synchronization than other pandemics. Third, the return volatility of each stock market varies, unit root tests show that daily stock index data are unstable while daily stock index returns are stable, and VAR(Vector Auto Regression) analyses presents significant inter-relations among 25 capital markets. Fourth, from the impulse response function analyses, we find that each market affects the other markets for short term periods, about 2~4 days, and no long term effect was not found. Fifth, Granger causality tests show one-side or two-sides synchronization between capital markets and we estimate, through forecasting error variance decomposition method, that the explanatory portions of each capital market on other markets vary from 10 to 80%. Research implications or Originality - The above results all together show that pandemic crises have strong effects on the synchronization of world capital markets and imply that these synchronizations should be carefully considered both in the investment decisions by individual investors and in the financial and economic policies by governments.

Analysis of Some Variable Energy Companies by Using VAR(p)-GARCH(r,s) Model : Study From Energy Companies of Qatar over the Years 2015–2022

In this study, the nature of the weekly stock price relationships of several Qatar energy companies, namely the weekly stock price of Qatar Fuel Company (QFLS), Qatar Gas Transport Company (QGTS), and Qatar Electricity and Water Company (QEWC), will be discussed. The duration of data weekly stock price is from January 2015 to April 2022. This study aimed to obtain the best model for the weekly stock price relationship of the three companies QFLS, QGTS, and QEWC. The multivariate time series analysis method will be used to evaluate the data. From the analysis using multivariate time series modeling, the best model is VAR(3)-GARCH)(1,1). Based on this best model, further analysis is carried out, namely Granger causality, impulse response function (IRF), and forecasting for the next 12 periods. The Granger causality test found that the QFLS has Granger causality on the QGTS (unidirectional), while the QGTS and QEWC variables have bidirectional Granger causality. The IRF analysis indicated that if there is a shock of 1 standard deviation in QFLS, then QFLS and QEWC will fluctuate for the first six weeks and move toward equilibrium from the seventh week onwards, while the impact on QGTS can be ignored. Suppose there is a shock of 1 standard deviation in the QGTS. In that case, the QFLS and QEWC will respond by fluctuating for the first six weeks, and at the seventh week and move toward equilibrium, while the impact on QGTS can be ignored; and if there is a shock of 1 standard deviation in QEWC, then QFLS and QEWC will respond negatively and fluctuating for the first six weeks, and at the seventh week toward equilibrium, while the impact on QGTS is negligible. Forecasting for the next 12 periods shows that the farther the forecasting period, the larger the standard error. This indicates that the ffarther the period is, the more unstable it is.

The interdependence of gold, US dollar and stock market in the context of COVID-19 pandemic: an insight into analysis in Asia and Europe

Using the panel data vector autoregression (PVAR) model, this study examines the correlation between the stock market, gold price and USD exchange rate in the context of the COVID-19 pandemic in 55 Asian and 32 European countries from 11 March 2021 to 29 October 2021. The results of Granger causality test show that in Asian countries, there is a bidirectional causality between stock market and gold price. In addition, there is a unidirectional relationship between the stock market and the USD exchange rate, while the gold price and the USD exchange rate are completely independent of each other. Meanwhile, in European countries, stock market, gold price and USD exchange rate have a causal relationship at 1% significant level. The results of the impulse-response function analysis show that, in Asia, the stock market has a negative impact on the gold price and a positive effect on the USD exchange rate. In Europe, the stock market has a negative impact on the other two markets in the short term. The variance decomposition results suggest that, in Europe, the stock market return explains 2.5% for the gold price shock and 6.2% for the USD exchange rate shock from the tenth period. Meanwhile, these figures in the Asian countries are 1.6% and 3.2%, respectively.