Nonlinear dynamics of gold and the dollar

Qing He (), Yongxiu Guo and Jishuang Yu

The North American Journal of Economics and Finance, 2020, vol. 52, issue C

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 (search for similar items in EconPapers)
JEL-codes: F31 G15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:52:y:2020:i:c:s1062940820300577

DOI: 10.1016/j.najef.2020.101160

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