Dynamics Between Strategic Commodities and Financial Variables

Thai-Ha Le and Youngho Chang ()

No 1104, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

Abstract: This study employs the bounds testing approach to cointegration to investigate the relationships between the prices of two strategic commodities (oil and gold) and the financial variables (interest rates, exchange rates and stock prices) of Japan – a major oil-consuming and goldholding country. Our results suggest that the prices of gold and stock can help form expectations of higher inflation over time. In the short run, only gold prices impact the interest rate in Japan. Overall the findings of this study could help the Japanese monetary authority in conducting monetary policy and investors of Japanese yen in building their optimal portfolios. Specifically our findings suggest that the optimal choice in the long term for those who invest in yendenominated assets would be to include gold in their portfolios.

Keywords: strategic commodities; financial variables; bounds test to cointegration (search for similar items in EconPapers)
JEL-codes: C32 E4 F31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2011-04
New Economics Papers: this item is included in nep-mon and nep-sea
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Citations: View citations in EconPapers (1)

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