The price of gold and the exchange rate |
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Authors: | Larry A. Sjaastad Fabio Scacciavillani |
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Affiliation: | Department of Economics, University of Chicago, 1126 East 59th Street, Chicago, IL 60637, USA;International Monetary Fund, Washington, DC 20431, USA |
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Abstract: | This paper examines the theoretical relationship between the major exchange rates and the prices of internationally-traded commodities. In the empirical section, the case of gold is analyzed using forecast error data. Among other things, it is found that, since the dissolution of the Bretton Woods International monetary system, floating exchange rates among the major currencies have been a major source of price instability in the world gold market and, as the world gold market is dominated by the European currency bloc, appreciations or depreciations of European currencies have strong effects on the price of gold in other currencies. |
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Keywords: | JEL classification: D40 F33 |
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