On the time-varying links between oil and gold: New insights from the rolling and recursive rolling approaches

Balcilar M., ÖZDEMİR Z. A., Shahbaz M.

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, vol.24, no.3, pp.1047-1065, 2019 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 24 Issue: 3
  • Publication Date: 2019
  • Doi Number: 10.1002/ijfe.1704
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.1047-1065
  • Keywords: gold and oil prices, recursive rolling estimation, rolling estimation, time-varying Granger causality, CRUDE-OIL, STRUCTURAL-CHANGE, ERROR-CORRECTION, VECTOR AUTOREGRESSIONS, STATISTICAL-INFERENCE, FINANCIAL CRISIS, EXCHANGE-RATE, STOCK-MARKET, CAUSAL NEXUS, PRICES
  • Ankara Haci Bayram Veli University Affiliated: Yes


This study analyses the dynamic linkages between oil and gold prices for the spot and 1- to 12-month futures markets using monthly data over the period 1983-2016. To do this, we use the rolling and recursive rolling Granger causality approaches. The distinguishing feature of this study from the previous studies is that this is the first study investigating the causal links between oil and gold using time-varying causality tests. The findings show that the causality links between oil and gold display strong time variation. Although causal links are not detected for most of the study period, strong bidirectional or unidirectional causality is found in several subsamples. The duration of the periods with causality links varies from a few months to 3 years, whereas the duration for the noncausality periods might be 15 years long. By date stamping the causality links between oil and gold, our paper discovers that causality from oil to gold is related to large oil price changes, whereas causality from gold to oil is related to large financial crises. The evidence obtained in the paper points out the dangers of assuming a constant causality link between oil and gold markets because these links might break down unexpectedly. Our findings point out to the dangers of assuming noncausality between oil and gold particularly in hedging oil price risk using gold.