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Nonlinear causality between oil and precious metals

Melike Bildirici and Nermin Türkmen ()

Resources Policy, 2015, vol. 46, issue P2, 202-211

Abstract: This work aims to analyze the cointegration and causality relationship among oil and precious metals of gold, silver and copper by using nonlinear ARDL and two popular nonlinear causality tests; Hiemstra and Jones (1994), and Kyrtsou and Labys (2006) test for the period from 1973:1 through 2012:11 monthly. According to the asymmetric Kyrtsou and Labys test (2006) results, an interesting finding emerges; precious metal prices returns respond nonlinearly to shocks to changes in crude oil prices only at earlier lags. Symmetric case results imply that there is evidence for bidirectional causality between pairs of oil and gold price and oil and silver price. Moreover a unidirectional relationship emerge for oil and copper prices for the asymmetric positive case and no causality for other cases. According to Hiemstra and Jones causality test, bi-directional causality between gold and oil and copper and oil and a unidirectional Granger causality running from oil price to silver price have emerged. In this way, asymmetric Kyrtsou and Labys (2006) results and Hiemstra and Jones (1994) results are different. Although the tests do not provide consistent results for the considered commodities, it can be concluded that, our models grasped the nonlinear nature in the price discovery process, hence partially captured the nonlinearity between oil and gold markets and their important role in macroeconomy.

Keywords: Oil and gold price volatility; Non-linear ARDL; Non-linear Granger causality; Mackey Glass Model (search for similar items in EconPapers)
Date: 2015
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