Gold and crude oil prices after the great moderation
Peter Sephton () and
Energy Economics, 2018, vol. 71, issue C, 273-281
Previous studies have reported that gold prices and crude oil prices seem to be related, with causality generally running from oil prices to gold prices. This paper revisits the question using non-linear threshold cointegration methods. It examines how a shock to oil prices affects gold prices, with the impacts shown to depend on both the size of the shock and the region within which the system lies when the shock occurs. This simple, yet novel result helps to explain why earlier studies found conflicting evidence on whether gold and crude prices share a long-run relationship. The empirical findings also suggest that energy policies should not be designed without consideration for their interaction with financial policies.
Keywords: Threshold cointegration; Error correction equation; Multivariate adaptive regression splines; Gold price; Brent oil price (search for similar items in EconPapers)
JEL-codes: C14 C53 C58 G11 Q4 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:71:y:2018:i:c:p:273-281
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