Is Gold a Hedge Against Turkish Lira?

Feride Öztürk and Acikalin Sezgin
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Acikalin Sezgin: Department of Economics, Dunlupinar University, Tavsanli Yolu 10.Km, Kutahya, Turkey

South East European Journal of Economics and Business, 2008, vol. 3, issue 1, 35-40

Abstract: This paper investigates whether gold is an internal hedge and/or an external hedge against Turkish lira (TL) by using monthly data from January 1995 to November 2006. Cointegration test results confirm the long-term relationships between the gold price and consumer price index and between the gold price and TL/US dollar exchange rate. The Granger Tests, based on vector error correction model (VECM), indicate that gold price Granger causes the consumer price index and TL/US dollar exchange rate in a unidirectional way. It is concluded that gold acts as an effective hedge against potential future TL depreciation and rising domestic inflation. Furthermore, gold price may be considered as a good indicator of inflation and hence it can be used as a guide to monetary policy.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:seejeb:v:3:y:2008:i:1:p:35-40:n:4

DOI: 10.2478/v10033-008-0004-x

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