Journal article
A regime-dependent assessment of the information transmission dynamics between oil prices, precious metal prices and exchange rates
International review of economics & finance, v 40(40)
Nov 2015
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
We use the Bayesian Markov-switching vector error correction (MS-VEC) model and the regime-dependent impulse response functions (RDIRFs) to examine the transmission dynamics between oil spot prices, precious metals (gold, silver, platinum, and palladium) spot prices and the US dollar/euro exchange rate. Using daily data from 1987 to 2012, two regimes (low and high volatility regimes) appear to be prevalent for this system. We find evidence that among the five commodity prices the gold prices are the most informative in the group in the high volatility regime, while gold, palladium, and platinum are the most informative in the low volatility regime. Though the platinum and palladium prices impact each other, the impacts in the high volatility regime are asymmetric. In addition to its low correlation in the group, palladium's negative impact on the exchange rate and gold makes it a reliable hedge asset for investors. Gold is the least volatile variable, thus affirming its use as a “safe haven” asset, while silver and oil are the most volatile in the group. Understanding the dynamics of these commodity prices should help investors decide how to invest during periods of low vs. highly volatile regimes.
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Details
- Title
- A regime-dependent assessment of the information transmission dynamics between oil prices, precious metal prices and exchange rates
- Creators
- Mehmet Balcilar - Eastern Mediterranean UniversityShawkat Hammoudeh - Drexel UniversityNwin-Anefo Fru Asaba - Eastern Mediterranean University
- Publication Details
- International review of economics & finance, v 40(40)
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000367111500006
- Scopus ID
- 2-s2.0-84927933456
- Other Identifier
- 991019167949604721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics