【Abstract】
Notwithstanding the widely held view that gold and the dollar are negatively correlated, we ask when and why gold and the dollar sometimes depart from their typical inverse relationship and go so far as to move in parallel. Using a threshold vector error correction model (VECM), we investigate the nonlinear relationship between gold and the dollar. We find evidence of short run positive correlation between gold and the dollar under extreme market conditions. Our result suggests that the hedging property of gold is influenced by the gold-dollar threshold process.
【Keywords】
Gold; exchange rate; nonlinear dynamics; threshold cointegration.
【Author】
Qing He, Senior Research Fellow of IMI, School of Finance & China Financial Policy Research Center, Renmin University of China
Yongxiu Guo, Kelley School of Business, Indiana University
Jishuang Yu, School of Finance, Renmin University of China