The Relationship between Gold and Brent Crude Oil Prices: An Unrestricted Vector Autoregression Approach

Izabela Pruchnicka-Grabias

Abstract


There is an ongoing scientific debate on how gold and crude oil affect each other prices. It is of high importance as both of them are strategic assets. The aim of the study is to check whether prices of these two assets influence each other. If so, if this is a short-term or a long-term relation and what the causality between these assets prices is. Daily data from January 2005 to December 2020 are used. The author applies Johansen cointegration test, Granger causality test and VAR model, denies a long-term and confirms a short term relation between gold and crude oil prices. However, it goes only in one direction that is from gold to crude oil. Such an interaction has significant consequences for investors, traders, producers, authorities, policymakers.

Keywords: VAR, gold, crude oil price, Granger causality

JEL Classifications: G15, C51, F37

DOI: https://doi.org/10.32479/ijeep.11229


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