【IMI Working Paper No. 2001 [EN]】Nonlinear Dynamics of Gold and the Dollar

2020-02-27 IMI

【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.

【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

IMI Working Paper No. 2001 [EN]

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【IMI Working Paper No. 2001 [EN]】Nonlinear Dynamics of Gold and the Dollar

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