Does economic policy uncertainty influence gold prices? Evidence from a nonparametric causality-in-quantiles approach

Syed Raza, Nida Shah and Muhammad Shahbaz

Resources Policy, 2018, vol. 57, issue C, 61-68

Abstract: Economic policies play a vital role in shaping economic development of an economy, and any uncertainty in the policies slows down its development process. Several factors are identified as predictors of economic policy uncertainty, and of these, gold price has been identified as the most significant. Therefore, the purpose of this study is to examine the association between economic policy uncertainty and gold prices by using the monthly data from 1995 (January) to 2017 (March). The standard linear Granger causality test and nonparametric causality-in-quantiles approach have been applied for empirical purpose. The standard linear Granger causality test shows that no causal association exists between economic policy uncertainty and gold prices. Then, the nonparametric causality-in-quantiles test given by Balcilar et al. (2016a) is applied. This approach allows for examining the quantile causality-in-mean and variance. The result of the nonparametric causality-in-quantiles shows the rejection of null hypothesis, which implies that economic policy uncertainty causes gold prices in all the examined countries, especially at the low tails. Moreover, the quantile causality-in-variance also shows the acceptance of null hypothesis in the majority of the cases. This study provides valuable implications for academics, policy makers, and investors.

Keywords: Gold price; Economic policy uncertainty; Nonparametric causality-in-quantile (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (85)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:57:y:2018:i:c:p:61-68

DOI: 10.1016/j.resourpol.2018.01.007

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