Co-integration analysis with structural breaks: South Africa’s gold mining index and USD/ZAR exchange rate
This paper examines the presence of cointegration between South African gold mining index and USD/ZAR exchange rate. The results show that gold index and USD/ZAR exchange rate series are both I(1) and are cointegrated. The Granger causality test shows a two-way directional causality between gold ind...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2016-10-01
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| Series: | Banks and Bank Systems |
| Online Access: | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/7858/BBS_en_2016_03_Chifurira.pdf |
| Summary: | This paper examines the presence of cointegration between South African gold mining index and USD/ZAR exchange rate. The results show that gold index and USD/ZAR exchange rate series are both I(1) and are cointegrated. The Granger causality test shows a two-way directional causality between gold index and USD/ZAR exchange rate for the period 9 June 2005-9 June 2015. By accounting for possible structural breaks, the Zivot-Andrews unit root test suggests two different breaking points in the data. By using the breaking dates to divide the dataset into 3 sub-periods, the results show that gold index and USD/ZAR exchange rate series are not cointegrated. The Granger causality test shows no causality between the two variables. This finding suggests that gold mining index does not play a key role in explaining the trends in the exchange rate and likewise exchange rate does not affect gold mining index.
Keywords: USD/ZAR exchange rate, gold mining index, unit root tests, breaking points, cointegration. JEL Classification: F3, F4, F63, O47 |
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| ISSN: | 1816-7403 1991-7074 |