Cointegration and Causality among Dollar, Oil, Gold and Sensex across Global Financial Crisis

Narinder Pal Singh and Sugandha Sharma

Vision, 2018, vol. 22, issue 4, 365-376

Abstract: Over the globe, the various financial markets are becoming integrated and the linkages among variables Gold prices, Crude Oil prices, US D ollar rate and Stock market (GODS) invite a special attention of various financial analysts and investors. For an import-dependent country like India, the interplay among these variables is vital. Thus in this study, we investigate the cointegration and causality relationship among gold, crude oil, us dollar and stock market (Sensex) across the global financial crisis of 2008. We use Johansen's cointegration technique, Vector Error Correction Model (VECM), Vector Auto Regression (VAR), VEC Granger Causality/Block Exogeneity Wald Test and Granger Causality, and Variance Decomposition to study cointegration and strength & direction of causality for three sub-periods. Johansen's cointegration test results indicate that there is long-run equilibrium relationship among the variables in the pre-crisis and the crisis periods but not in post-crisis period. VECM results report that none of four models of the variables show long-run causality in the pre-crisis period at 5% level of significance. During the crisis period, both crude oil and Sensex models show long run causality. However, in some cases short-run causality is indicated in results. Granger causality test results show that there is one-way causality from USD and Sensex to crude oil, and from gold and Sensex to USD. Thus, we conclude that the relationship among GODS is dynamic and has been affected by global financial crisis of 2008.

Keywords: Cointegration; Causality; Crude Oil; Gold; Dollar; Stock Market (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0972262918804336 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:vision:v:22:y:2018:i:4:p:365-376

DOI: 10.1177/0972262918804336

Access Statistics for this article

More articles in Vision
Bibliographic data for series maintained by SAGE Publications ().