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Dynamics of oil price, precious metal prices and the exchange rate in the long-run

journal contribution
posted on 2024-11-02, 03:41 authored by Sefa Awaworyi ChurchillSefa Awaworyi Churchill, John Inekwe, Kris Ivanovski, Russell Smyth
We examine the relationship between the oil price, prices of precious metals (gold, silver, and platinum) and the US dollar/British Pound exchange rate using parametric and non-parametric modelling over a 135-year period. For the parametric model, we employ a two-regime threshold vector error correction model (TVECM) and find non-linearity and asymmetries in the long-term relationship between the oil-gold price and oil-silver price pairs during the ‘typical regime’, in which the majority of observations lie. Non-linear Granger causality suggests evidence of bidirectional and unidirectional causality. For the non-parametric model, we employ Local Linear (LL) non-parametric regression to relax the assumptions regarding functional form. The relationship between the oil price and each of the precious metal prices and the exchange rate exhibit non-linearities. The relationship between precious metal prices and the oil price is positive and generally increasing over time, while the LL estimates for the exchange rate are negative and then positive and highly non-linear.

History

Journal

Energy Economics

Volume

84

Number

104508

Start page

1

End page

13

Total pages

13

Publisher

Elsevier BV

Place published

Netherlands

Language

English

Copyright

© Elsevier B.V.

Former Identifier

2006093980

Esploro creation date

2020-06-22

Fedora creation date

2019-12-02

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