Is gold a safe haven for the dynamic risk of foreign exchange?

Kuan Min Wang, Thanh-Binh Nguyen Thi and Yuan-Ming Lee
Additional contact information
Thanh-Binh Nguyen Thi: Chaoyang University of Technology
Yuan-Ming Lee: Southern Taiwan University of Science and Technology

Future Business Journal, 2021, vol. 7, issue 1, 1-17

Abstract: Abstract This paper uses the panel data of 15 countries from 2009 to 2020 to construct the time-varying parameter panel vector error correction model for testing the hypothesis of dynamic hedging characteristics of gold on exchange rate. As the existing literature has never considered that the foreign exchange risk hedged by gold is dynamic, this study can fill the research gap in this area. The empirical results show that: First, gold can partly hedge against the depreciation of the currency in the long run; second, gold is unable to hedge against the risk of the exchange rate when considering dynamic hedging effects in the short run; third, when facing unexpected shocks, the impulse response shows that the gold returns have reversible reactions compared to exchange rate fluctuations; therefore, gold can regard as a safe haven for foreign exchange markets; Finally, the government, as well as investors should always be concerned about these dynamic risks and formulate effective hedging strategies to control the currency uncertainty.

Keywords: Gold price; Foreign exchange risk hedge; Time-varying parameter; Panel VECM model; Impulse response (search for similar items in EconPapers)
JEL-codes: C32 E44 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1186/s43093-021-00101-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:futbus:v:7:y:2021:i:1:d:10.1186_s43093-021-00101-9

Ordering information: This journal article can be ordered from
https://fbj.springeropen.com/

DOI: 10.1186/s43093-021-00101-9

Access Statistics for this article

Future Business Journal is currently edited by Soad Kamel Rizk and Hayam Wahba

More articles in Future Business Journal from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().