On the Economic Determinants of the Gold-Inflation Relation

22 Pages Posted: 6 Sep 2013 Last revised: 20 Mar 2014

See all articles by Jonathan A. Batten

Jonathan A. Batten

RMIT University; The University of Sydney

Cetin Ciner

University of North Carolina at Wilmington

Brian M. Lucey

Trinity Business School, Trinity College Dublin; University of Sydney Business School; Ho Chi Minh City University of Economics and Finance; Jiangxi University of Finance and Economics

Date Written: March 19, 2014

Abstract

We examine the long term dynamic relation between inflation and the price of gold. We begin by showing that there is no cointegration between gold and the consumer price index (CPI) if the volatile period of the early 1980s is excluded from the data. However, we are also able to demonstrate that there is significant time variation in the relation, such that comovement between the variables has indeed increased in the last decade. Examination of the underlying macroeconomic factors that could generate time variation in the gold-CPI linkage suggests gold’s sensitivity to the CPI is related to interest rate changes: a finding that highlights the monetary nature of gold as a commodity.

Keywords: Gold, Inflation, monetary policy

JEL Classification: Q47, O13, C22

Suggested Citation

Batten, Jonathan A. and Ciner, Cetin and Lucey, Brian M., On the Economic Determinants of the Gold-Inflation Relation (March 19, 2014). Available at SSRN: https://ssrn.com/abstract=2320754 or http://dx.doi.org/10.2139/ssrn.2320754

Jonathan A. Batten

RMIT University ( email )

Level 12, 239 Bourke Street
Melbourne, Victoria
Australia

HOME PAGE: http://https://www.rmit.edu.au/contact/staff-contacts/academic-staff/b/batten-professor-jonathan

The University of Sydney ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

HOME PAGE: http://https://business.sydney.edu.au/staff/jonathan.batten

Cetin Ciner

University of North Carolina at Wilmington ( email )

Wilmington, NC 28403
United States

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

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