Gold Pricing in India: An Econometric Analysis. Mani and Vuyyuri (2003)
This 2003 paper offers an examination of the factors affecting the price of gold in Indian Rupee’s. The abstract states that:
The importance of gold in India need not be elaborated to an economist or to a layman. Traditionally gold has been deeply entrenched in the Indian social psyche. The economic importance is also not less as has been elaborated in the paper. But there have been few empirical studies. Hence this paper tries to make an attempt at explaining the importance through a study of gold price determination
The authors form a regression equation where the logged Rupee price of gold is a function logs of the following variables: expectedcted inflation, the expected interest rate, the exchange rate between the UD dollar and the Indian Rupee, the price of silver the lagged price of gold and dummy variables to capture qualitative factors that the authors believe would affect the price of gold, however what these are not detailed. The ratio of the SENSEX stock market index to the gold price is included but not logged.
The logged price of gold in Rupee’s is found to have a negative relationship between the expected interest rates and the events that the authors define as significant for gold prices a priori. The exchange rate of Rupee’s per us dollar is significantly positively correlated; therefore a rise in the value of the Rupee in dollars is associated with a move in the same direction as the value of gold in US Dollars. Expected Indian inflation is not found to be related to the Rupee gold price.
The specification of the model may not be ideal as the logged gold price is used as the dependant variable which is generally not found to be stationary from studies such as Bialkowski et al. (2011). The authors do not say whether the Rupee price has been checked for stationary.
Method: Econometric regression
Data: Annual data from 1979 to 2000 from the Handbook on the Indian Economy 2000.
Gold and silver in Indian Rupee’s per 10mg of Gold.
Full Citation: Mani, G. S. and S. Vuyyuri (2003). “Gold Pricing in India: An Econometric Analysis.” Ekonomska Istrazivanja/Economic Research 16(1): 29-44.