Oil prices, gold prices and stock markets: Evidence from BRICS and MINT economies

This study investigates the relationship between oil prices, gold prices and stock markets from emerging markets' perspective during a 16-year period that covers before and after the financial crisis that emerged in late 2007. Focusing on BRICS and MINT economies, the study first tries to capture the dynamic connections between these variables for each individual country in a VAR setting by using monthly data from 2000:01 to 2015:12. Second, these economies are examined in a panel setting in order to test for Granger Causality. Output from the VAR estimations give hints about connections between national macroeconomic indicators and some of the financial variables: Negative link between interest rates and currency depreciation on stock prices and positive link between inflation and gold prices, which can support the idea that gold can be used protection against inflation. However, VAR analyses fail to detect consistent ties between stocks markets, gold prices and oil prices of these economies. The study then proceeds with a panel setting which provides clearer results: Stock market prices Granger Cause Brent oil prices, although the connection is lost for BRICS during pre-financial crisis period. This finding indicates that stock market prices of these economies can be used as a predictor of oil prices. There is no causality between gold prices and stock market prices, which can be interpreted as an independence factor to support the safe-haven arguments. This view is also justified by the relatively steady trend of gold prices during the examination period, where stock prices fluctuate drastically. Keywords: BRICS, MINT, Emerging Markets, Stock Markets, Gold Prices, Oil Prices, VAR, Panel Granger Causality