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EXCHANGE MARKET VERSUS OIL AND GOLD PRICES: AN EUROPEAN APPROACH

Vasco Salazar Soares () and Antonieta Lima ()
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Vasco Salazar Soares: Isvouga
Antonieta Lima: Isvouga

No 13/2010, Working Papers from Universidade Portucalense, Centro de Investigação em Gestão e Economia (CIGE)

Abstract: Considering the few studies about the coupled relation between oil and gold prices and the exchange market, the purpose of this article is to explore this line of investigation. So, combining different approaches on oil and gold prices, stock indexes and exchange market (among others, Dooley, Isard and Taylor (1992), Sadorsky (1999), Park and Ratti (2007), Afshar (2008), Miller and Ratti (2008), Abdelaziz, Chortareas and Cipollini (2008) studies), our model, an unrestricted VAR and a VECM model, mixed all these variables applied to the European market, in order to explain the exchange market variation, from 1999:01 to 2010:05. We innovate by considering both gold and crude prices as explaining variables, differently from the above-mentioned authors, who only consider either gold or crude prices. Our results suggested that the model explains the long-run relationship between usd/eur and the mentioned variables, being consistent with the results previously found. Differently from the authors mentioned, in our model unrestricted VAR works better than VECM, with a R2 of 45,66% faces to 34,34%.

Keywords: Exchange rate; crude price; gold price; stock index; inflation rate (search for similar items in EconPapers)
JEL-codes: E44 F37 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2010-09-29
New Economics Papers: this item is included in nep-ene, nep-mac and nep-mic
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