Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach

Hoang, Thi Hong Van; Lahiani, Amine; Heller, David

doi:10.1016/j.econmod.2015.12.013

Cited by 164 publications

(116 citation statements)

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“…Moreover, unlike other error correction models where the integration order of the considered time series should be the same, the NARDL model relaxes this restriction and allows for a combination of different integration orders. This flexibility is very important, as shown in Hoang et al (2016). Finally, this method also helps solve the multicollinearity problem by choosing the appropriate lag order for the variables (Shin et al 2014).…”

Section: The Nardl Bounds Testing Approach For Cointegration Testsmentioning

confidence: 99%

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Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis

et al. 2017

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This paper investigates the asymmetric relationship between energy consumption and economic growth by incorporating financial development, capital and labour into a production function covering the Indian economy from 1960Q 1 -2015Q 4 . The nonlinear autoregressive distributed lag bounds testing approach is applied to examine the asymmetric cointegration between the variables. An asymmetric causality test is also employed to examine the causal association between the considered variables. The results indicate cointegration between the variables in the presence of asymmetries. The asymmetric causality results show that only negative shocks in energy consumption have impacts on economic growth. In the same vein, only negative shocks in financial development have impacts on economic growth. By contrast, symmetrically, capital formation causes economic growth. Finally, over the study period, a neutral effect exists between the labour force and economic growth in India. The implications of these results for growth policies in India are also discussed.Keywords: Financial Development, Energy, Growth, India, Asymmetries JEL classification: O13 Acknowledgements: We would like to thank the editor, Professor Richard Tol (University of Sussex, Brighton, UK), as well as the three anonymous reviewers, for their valuable comments and suggestions that helped us improve our paper significantly. We also thank the participants at the 7 th International Research Meeting in Business and Management (IPAG, Nice, France, 11-12 July 2016). We are also grateful to Jawad Kazmi for his technical assistance. The authors' are responsible for any remaining errors or shortcomings. IntroductionThis study uses quarterly data to investigate the relationship between energy consumption and economic growth in India over the 1960-2015 period. Financial development (measured by domestic credit to the private sector), 1 capital formation and labour force 2 are also included in the Cobb-Douglas production function. This study's main contribution to the existing literature on the energy-growth nexus concerns its examination of the potential asymmetric relationship between the variables. Taking this asymmetry into account is important because a positive or negative variation on one variable does not have the same impact on the other variable. The existence of an asymmetric relationship between two variables can be caused by numerous factors, one of which concerns the complexity of economic systems and the mechanisms that generate the variables under study. This complexity may induce various channels through which one variable affects another. In our case, the relationship between energy consumption and economic growth has been found to be very complex because previous studies have shown four possible impact channels: the growth, conservative, feedback and neutrality hypotheses. 3 On the one hand, the relationship between energy consumption and financial development can also be very complex because numerous impact channels can exist between them...

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Section: The Nardl Bounds Testing Approach For Cointegration Testsmentioning

confidence: 99%

“…As has been the convention in previous studies, e.g., Hoang et al (2016), we will model our regressions based on the natural logarithms of the series under study to ensure better distributional properties.…”

Section: Asymmetric Causality Testsmentioning

confidence: 99%

Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis

et al. 2017

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“…Our results offer new insights in the relationship between gold and inflation in three major economies and looks into the very roots of inflation: money supply. Recent findings by Hoang et al (2016) have suggested that gold was not a hedge against inflation for any of the countries considered in the long-run; though it was a hedge in the short-run for both the US and the UK. We complete their results by identifying the breaks in the relationship between the series, visualizing when gold was indeed a hedge against inflation, and by arguing that since gold is a hedge against money supply, it's true inflation hedging abilities are not to be found by contrasting the gold price with official CPI rates.…”

Section: Introductionmentioning

confidence: 99%

“…The first focuses on how inflation affects gold prices: here recent examples are the paper of Batten et al (2014) who find evidence for time-variation in the gold/inflation relationship and account gold's sensitivity to inflation to interest rate changes, or Bampinas and Panagiotidis (2015) who look at over two hundred years of data and find that gold is an inflation hedge in the long run for both the USA and the UK, Hoang et al (2016) recently offered evidence in support to the findings of Bampinas and Panagiotidis (2015), and finally, Sharma (2016) who finds evidence for the CPI to be able to predict gold returns in the UK and the USA among other countries. The second approach focuses more on how the price of gold affects inflation, such as Moore (1990) who states that gold prices are affected by the market's view of inflation, or Mahdavi and Zhou (1997) who consider gold to be a leading indicator of the inflation rate.…”

Section: Introductionmentioning

confidence: 99%

“…Building up on previous academic works, namely Batten et al (2014), Bampinas and Panagiotidis (2015), Hoang et al (2016) and Sharma (2016) we look at the link between local gold prices and local inflation from a timevarying perspective. A review of relevant academic literature suggests multiple approaches to the issue of the relationship between gold and inflation (Table 1).…”

Section: Introductionmentioning

confidence: 99%

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Gold and inflation(s) – A time-varying relationship

Lucey

Sharma

Vigne³

2017

Economic Modelling

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What is the relationship between the price of gold and inflation? How stable is it -over time and across measures of inflation? We examine this for three countries (the USA, the UK and Japan) over forty years and with a variety of measures of inflation and monetary liquidity. We apply a formal test for time variation and proceed to extract time varying cointegration relationships. Both formal and graphical evidence points to a break in the relationship(s) of gold and official inflation in the mid 1990s in the USA but to less clear results for the UK and Japan. However, gold seems to have offered a protection against an increase in money supply throughout nearly the entire past 40 year period in the US and the UK but failed to do so in Japan. Supporting previous findings we find evidence for a time-varying relationship in cointegration between gold and both predicted and realized inflation in nearly all cases. Contrasting multiple inflation indicators, we find evidence for the importance of money supply in the gold/inflation relationship.

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Can urban coffee consumption help predict US inflation?

Salisu

Swaray

Adediran

2019

Journal of Forecasting

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Motivated by the importance of coffee to Americans and the significance of the coffee subsector to the US economy, we pursue three notable innovations. First, we augment the traditional Phillips curve model with the coffee price as a predictor, and show that the resulting model outperforms the traditional variant in both in‐sample and out‐of‐sample predictability of US inflation. Second, we demonstrate the need to account for the inherent statistical features of predictors such as persistence, endogeneity, and conditional heteroskedasticity effects when dealing with US inflation. Consequently, we offer robust illustrations to show that the choice of estimator matters for improved US inflation forecasts. Third, the proposed augmented Phillips curve also outperforms time series models such as autoregressive integrated moving average and the fractionally integrated version for both in‐sample and out‐of‐sample forecasts. Our results show that augmenting the traditional Phillips curve with the urban coffee price will produce better forecast results for US inflation only when the statistical effects are captured in the estimation process. Our results are robust to alternative measures of inflation, different data frequencies, higher order moments, multiple data samples and multiple forecast horizons.

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Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach

Cited by 164 publications

References 86 publications

Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis

Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis

Gold and inflation(s) – A time-varying relationship

Can urban coffee consumption help predict US inflation?

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