Dynamics between Strategic Commodities and Financial Variables: Evidence from Japan

This study applies the bounds testing approach to cointegration to the daily data from 01-December-1997 to 15-July-2016, in order to investigate the relationships between the prices of two strategic commodities (oil and gold) and the macro-financial variables (interest rate, exchange rate and stock price) in Japan, a major oil-consuming-and-importing as well as gold-holding-and-exporting country. The results suggest that oil prices seem to have limited information for the Japanese policy-makers in the long run. In the short run, however, oil and gold prices seem to have more useful information to presage fluctuations in the Japanese macro-financial variables including stock price and interest rate.