<abstract xml:lang="en" xmlns="http://www.w3.org/1999/xhtml"><p>This paper investigates whether gold is an internal hedge and/or an external hedge against Turkish lira (TL) by using monthly data from January 1995 to November 2006. Cointegration test results confirm the long-term relationships between the gold price and consumer price index and between the gold price and TL/US dollar exchange rate. The Granger Tests, based on vector error correction model (VECM), indicate that gold price Granger causes the consumer price index and TL/US dollar exchange rate in a unidirectional way. It is concluded that gold acts as an effective hedge against potential future TL depreciation and rising domestic inflation. Furthermore, gold price may be considered as a good indicator of inflation and hence it can be used as a guide to monetary policy.</p></abstract>

This paper investigates whether gold is an internal hedge and/or an external hedge against Turkish lira (TL) by using monthly data from January 1995 to November 2006. Cointegration test results confirm the long-term relationships between the gold price and consumer price index and between the gold price and TL/US dollar exchange rate. The Granger Tests, based on vector error correction model (VECM), indicate that gold price Granger causes the consumer price index and TL/US dollar exchange rate in a unidirectional way. It is concluded that gold acts as an effective hedge against potential future TL depreciation and rising domestic inflation. Furthermore, gold price may be considered as a good indicator of inflation and hence it can be used as a guide to monetary policy.

Is Gold a Hedge Against Turkish Lira?

Department of Economics, Dunlupinar University, Tavsanli Yolu 10.Km, Kutahya, Turkey

South East European Journal of Economics and Business

{"article-title":"Is Gold a Hedge Against Turkish Lira?"}

This paper investigates whether gold is an internal hedge and/or an external hedge against Turkish lira (TL) by using monthly data from January 1995 to...

Is Gold a Hedge Against Turkish Lira?

Published Online: Apr 14, 2008

Page range: 35 - 40

DOI: https://doi.org/10.2478/v10033-008-0004-x

This content is open access.