Estimating Long-Run Cointegration between Gold Prices and its Determinants

Umema Siddiqi

MPRA Paper from University Library of Munich, Germany

Abstract: The aim of this paper is to analyse the determinants of gold prices in Pakistan and to deduce long run co-integration between them, if any. The impact of global gold prices, interest rates, foreign exchange rates, silver prices and stock market performance have been measured on the gold prices in Pakistan. The study utilizes annual time series data of the said variables from 1973 to 2015. Different time series econometric techniques, such as the Unit Root Test using Augmented Dickey-Fuller (ADF) test, Johansen Co-integration, Vector Error Correction Model (VECM), and Granger causality test are used to analyse the long-run relationship among variables. The empirical results reveal that global gold prices, foreign exchange rates, and silver prices significantly affect gold prices in the local market. The results also suggest the existence of a long-run co-integration among the variables under study.

Keywords: gold prices; interest rate; foreign exchange rates; cointegration; vecm (search for similar items in EconPapers)
JEL-codes: C22 E21 E44 G12 (search for similar items in EconPapers)
Date: 2021-02-24
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