 Dynamic transmission effects between the interest rate, the US dollar, and gold and crude oil pricesYu Shan Wang and Yen Ling Chueh Economic Modelling, 2013, vol. 30, issue C, 792-798 Abstract: This paper shows that in the short term both gold and crude oil prices positively influence each other. Interest rates have a negative influence on the future gold prices and a positive influence on the future crude oil prices. In the long run, a relationship exists whereby interest rates influence the US dollar, which in turn influences international crude oil prices. When the Federal Reserve Board (Fed) lowers interest rates to boost the economy, market expectations for oil demand change and, as a result, crude oil prices fluctuate. In addition, there is a price transmission relationship from interest rates to gold prices. A reduction in interest rates influences investor expectations with respect to depreciation of the dollar. Investors then move their capital to the gold market for capital preservation or speculation. Finally, international gold and crude oil prices have feedback effects on interest rates. This paper infers that crude oil prices increasing to a certain level trigger inflation, at which juncture the Fed may tighten monetary policies to downturn the bloom economy. Keywords: Interest rate; Oil price; Gold price; Threshold model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:792-798 DOI: 10.1016/j.econmod.2012.09.052 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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