Is Gold Investment A Hedge against Inflation in Pakistan? A Cointegtaion and Causality Analysis in the Presence of Structural Breaks

Muhammad Shahbaz, Mohammad Iqbal Tahir and Imran Ali

MPRA Paper from University Library of Munich, Germany

Abstract: Last few years have witnessed overwhelming investments in the gold market both directly and indirectly. These overwhelming investments in the gold market by individual and institutional investors have gained the attention of the research community. Numerous studies have examined how investment in gold can be used to hedge against high inflation. The current study investigates the gold investment as an effective hedge to deal with inflation in case of Pakistan in long run as well as in short run. In doing so, time series data on gold prices, economic growth and inflation is used for the period 1997-2011 utilizing quarterly frequency. The study applies the ARDL bounds testing technique of cointegration for long run, and innovative accounting approach (IAA) to examine the direction of causality in variables. Our findings reveal that investment in gold is the best hedge to address inflation in both long run and short run in case of Pakistan. The implications and applications of the study have been discussed in detail.

Keywords: Gold prices; inflation; hedging; Pakistan (search for similar items in EconPapers)
JEL-codes: C5 (search for similar items in EconPapers)
Date: 2013-07-01, Revised 2013-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Is gold investment a hedge against inflation in Pakistan? A co-integration and causality analysis in the presence of structural breaks (2014)
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