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Do gold prices respond to real interest rates? Evidence from the Bayesian Markov Switching VECM model

Apergis, Nicholas, Cooray, Arusha, Khraief, Naceur, Apergis, Iraklis (2018) Do gold prices respond to real interest rates? Evidence from the Bayesian Markov Switching VECM model. Journal of International Financial Markets, Institutions and Money, . ISSN 1042-4431. (doi:10.1016/j.intfin.2018.12.014) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided)

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Abstract

The goal of this paper is to examine the transmission dynamics between the real interest rate and gold prices in the G7. The methodology follows the Bayesian Markov-Switching Vector Error-Correction (MS-VECM) model, along with regime-dependent impulse response functions, spanning the period 1975–2016. The findings suggest a positive association between gold prices and real interest rates, with the estimates remaining consistently positive and statistically significant across all G7 countries. The results indicate that gold prices can provide hedging services against real interest rate movements mainly during recessionary times. Our results continue to be robust when we extend the bivariate version of our modeling approach to include more drivers for gold prices.

Item Type: Article
DOI/Identification number: 10.1016/j.intfin.2018.12.014
Uncontrolled keywords: GoldInterest ratesMS-VECM model
Divisions: Faculties > Social Sciences > Kent Business School
Depositing User: I. Apergis
Date Deposited: 29 Apr 2019 08:49 UTC
Last Modified: 19 Aug 2019 10:39 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/73657 (The current URI for this page, for reference purposes)
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