What do we know about the inflation-hedging property of precious metals in Africa? The case of leading producers of the commodities

Oluwasegun Adekoya (), Johnson Oliyide and Hammad Tahir

Resources Policy, 2021, vol. 72, issue C

Abstract: Against the limited evidence of inflation-hedging potential of precious metals in Africa, this study examines the possibility of the four most popular and globally traded precious metals, namely gold, platinum, silver and palladium, in hedging investors against inflation risks in six African countries known for the production of the metals. We employ different empirical techniques in order to explore the inherent statistical features of the series. On a general note, we believe more in the results of the regime-dependent model which reveals the presence of nonlinearity and time variation in the results and show improved hedging performance. Our results suggest that inflation risks can be hedged by at least one precious metal in all the selected countries. Silver and gold provide the strongest (in five countries, i.e. Ghana, Morocco, Namibia, South Africa and Tanzania) and weakest (in just one country, i.e. Namibia) hedging performances respectively. Also, Namibia is the country whose inflation risks can be hedged by the highest number of metals (i.e. gold, silver and palladium). From these findings, we suggest that investors in these countries should begin to explore the effective strength of metals against the increasing risks of inflation inherent in most African countries. Also, the influencing role of nonlinearity and time variation should not be overlooked.

Keywords: Precious metals; Inflation risks; Hedging; Nonlinearity; Time-variation; Africa (search for similar items in EconPapers)
JEL-codes: E31 E44 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:72:y:2021:i:c:s0301420721001343

DOI: 10.1016/j.resourpol.2021.102120

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