Evaluation of Gold Market in India and its Price Determinants

The study assesses the influence of Oil prices, Exchange rate, trade deficit, and fiscal deficit on the prices of gold in India. Using the Johansen's cointegraion, variance Decomposition and Granger causality test for the period 1994 - 1995 to 2014 -2015 with monthly observations, the study fou...

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Bibliographic Details
Published in:Applied Econometrics and International Development 2017-01, Vol.17 (1), p.143
Main Authors: Seshaiah, Svenkata, Sarma, IRS, Tiwari, Aviral Kumar
Format: Article
Language:English
Subjects:
Causality
Crude oil
Crude oil prices
Foreign exchange rates
Gold markets
Petroleum
Prices
Trade deficit
Variables
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Summary:The study assesses the influence of Oil prices, Exchange rate, trade deficit, and fiscal deficit on the prices of gold in India. Using the Johansen's cointegraion, variance Decomposition and Granger causality test for the period 1994 - 1995 to 2014 -2015 with monthly observations, the study found that all variables are stationary at first difference and that there are two cointegration relationships between Gold prices, crude oil prices, exchange rate, Trade Deficit and Fiscal deficit. This implies that the variables under consideration have a long relationship. The results revealed that the variation in gold prices explained by gold itself by 93.4% where as the other variables’ influence on the variation of gold prices under consideration is negligible. Gold prices and trade deficit contributes 9.43% and 7.92% respectively in the variance of crude oil prices, where as the gold prices and trade deficit contributes 9.73% and 12.22% respectively in the variance of the prices of exchange rate. The variance in the trade deficit was explained by variance in gold price is as high as 11.31% compared all the other variables under consideration
ISSN:1578-4487