Is gold a safe haven for the dynamic risk of foreign exchange?

Abstract This paper uses the panel data of 15 countries from 2009 to 2020 to construct the time-varying parameter panel vector error correction model for testing the hypothesis of dynamic hedging characteristics of gold on exchange rate. As the existing literature has never considered that the forei...

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Autores principales:	Kuan-Min Wang, Thanh-Binh Nguyen Thi, Yuan-Ming Lee
Formato:	article
Lenguaje:	EN
Publicado:	SpringerOpen 2021
Materias:	Gold price Foreign exchange risk hedge Time-varying parameter Panel VECM model Impulse response Business HF5001-6182 Finance HG1-9999
Acceso en línea:	https://doaj.org/article/54381bb7b8214a2491b1ea1132d4ace9
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spelling	oai:doaj.org-article:54381bb7b8214a2491b1ea1132d4ace92021-11-07T12:14:55ZIs gold a safe haven for the dynamic risk of foreign exchange?10.1186/s43093-021-00101-92314-7210https://doaj.org/article/54381bb7b8214a2491b1ea1132d4ace92021-11-01T00:00:00Zhttps://doi.org/10.1186/s43093-021-00101-9https://doaj.org/toc/2314-7210Abstract This paper uses the panel data of 15 countries from 2009 to 2020 to construct the time-varying parameter panel vector error correction model for testing the hypothesis of dynamic hedging characteristics of gold on exchange rate. As the existing literature has never considered that the foreign exchange risk hedged by gold is dynamic, this study can fill the research gap in this area. The empirical results show that: First, gold can partly hedge against the depreciation of the currency in the long run; second, gold is unable to hedge against the risk of the exchange rate when considering dynamic hedging effects in the short run; third, when facing unexpected shocks, the impulse response shows that the gold returns have reversible reactions compared to exchange rate fluctuations; therefore, gold can regard as a safe haven for foreign exchange markets; Finally, the government, as well as investors should always be concerned about these dynamic risks and formulate effective hedging strategies to control the currency uncertainty.Kuan-Min WangThanh-Binh Nguyen ThiYuan-Ming LeeSpringerOpenarticleGold priceForeign exchange risk hedgeTime-varying parameterPanel VECM modelImpulse responseBusinessHF5001-6182FinanceHG1-9999ENFuture Business Journal, Vol 7, Iss 1, Pp 1-17 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	Gold price Foreign exchange risk hedge Time-varying parameter Panel VECM model Impulse response Business HF5001-6182 Finance HG1-9999
spellingShingle	Gold price Foreign exchange risk hedge Time-varying parameter Panel VECM model Impulse response Business HF5001-6182 Finance HG1-9999 Kuan-Min Wang Thanh-Binh Nguyen Thi Yuan-Ming Lee Is gold a safe haven for the dynamic risk of foreign exchange?
description	Abstract This paper uses the panel data of 15 countries from 2009 to 2020 to construct the time-varying parameter panel vector error correction model for testing the hypothesis of dynamic hedging characteristics of gold on exchange rate. As the existing literature has never considered that the foreign exchange risk hedged by gold is dynamic, this study can fill the research gap in this area. The empirical results show that: First, gold can partly hedge against the depreciation of the currency in the long run; second, gold is unable to hedge against the risk of the exchange rate when considering dynamic hedging effects in the short run; third, when facing unexpected shocks, the impulse response shows that the gold returns have reversible reactions compared to exchange rate fluctuations; therefore, gold can regard as a safe haven for foreign exchange markets; Finally, the government, as well as investors should always be concerned about these dynamic risks and formulate effective hedging strategies to control the currency uncertainty.
format	article
author	Kuan-Min Wang Thanh-Binh Nguyen Thi Yuan-Ming Lee
author_facet	Kuan-Min Wang Thanh-Binh Nguyen Thi Yuan-Ming Lee
author_sort	Kuan-Min Wang
title	Is gold a safe haven for the dynamic risk of foreign exchange?
title_short	Is gold a safe haven for the dynamic risk of foreign exchange?
title_full	Is gold a safe haven for the dynamic risk of foreign exchange?
title_fullStr	Is gold a safe haven for the dynamic risk of foreign exchange?
title_full_unstemmed	Is gold a safe haven for the dynamic risk of foreign exchange?
title_sort	is gold a safe haven for the dynamic risk of foreign exchange?
publisher	SpringerOpen
publishDate	2021
url	https://doaj.org/article/54381bb7b8214a2491b1ea1132d4ace9
work_keys_str_mv	AT kuanminwang isgoldasafehavenforthedynamicriskofforeignexchange AT thanhbinhnguyenthi isgoldasafehavenforthedynamicriskofforeignexchange AT yuanminglee isgoldasafehavenforthedynamicriskofforeignexchange
_version_	1718443485756915712

Is gold a safe haven for the dynamic risk of foreign exchange?

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