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Gold price index=β β USD index + β CPI +β Interest rate+ β remittance+u

1. The document proposes an econometric analysis of factors that affect gold prices in Vietnam over approximately 10 years from 2007 onward. 2. A linear regression model is proposed with gold price index as the dependent variable, and USD index, CPI, interest rates, and remittances as independent variables. 3. Rationale is provided for how each independent variable may theoretically impact gold prices based on existing economic relationships. The research question aims to empirically test the impact of these factors on gold prices in Vietnam using time series data sourced from the General Statistics Office of Vietnam.

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Nguyễn Gia Phương Anh
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41 views3 pages

Gold price index=β β USD index + β CPI +β Interest rate+ β remittance+u

1. The document proposes an econometric analysis of factors that affect gold prices in Vietnam over approximately 10 years from 2007 onward. 2. A linear regression model is proposed with gold price index as the dependent variable, and USD index, CPI, interest rates, and remittances as independent variables. 3. Rationale is provided for how each independent variable may theoretically impact gold prices based on existing economic relationships. The research question aims to empirically test the impact of these factors on gold prices in Vietnam using time series data sourced from the General Statistics Office of Vietnam.

Uploaded by

Nguyễn Gia Phương Anh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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1.

Topic specification:

According to tapchitaichinh.vn, in the first 11 months of 2019, gold is perceived to be one of the
most lucrative investing instruments with a remarkable 12.8 percent rise (calculated on SJC
gold), higher than the savings interest rate at around 7-8% along with a 0.2% decline in the
USD /VND exchange rate. This has made the gold market more appealing to investors and will
thereby allow the financial market to develop as a whole. Based on this strong interest, for the
new topic, we want to provide an econometrical report to shed light on the effects of the possible
variables such as the USD index, CPI, Interest rates and maybe even Remittance from
Vietnamese citizens working from other countries on the Gold price index in all cities of
Vietnam (the dependent variable) through a period of approximately 10 years from around 2007
and onward.

a) T-test of individual partial coefficients:

The hypothesis test is Ho: βi=0 (i=2,3,4,5)

Ha: βi≠0

b) Testing the overall significance of all coefficients:

The hypothesis test is Ho: β2=β3=β4=β5=0

Ha: At least one coefficient is not zero

2. Model framework: Linear regression model for the population:

Gold price index=β1 + β 2∗USD index + β 3∗CPI + β 4∗Interest rate+ β 5∗remittance+ui

We also want to decide on whether we should add or drop some variables, but that will be tested
once we’ve actually gotten down to business. Additionally, we’ll be using the estimated model in
our official paperwork, which is illustrated as follows:

Gold price index= β^1 + ^


^ β 2∗USD index+ ^
β3∗CPI + ^
β 4∗Interest rate+ ^
β5∗remittance

a) Rationale:
The objective of this research is to analyze the macroeconomic factors that can have
impacts on the index of gold prices in Vietnam through the years. The theoretical effects
of the independent variables can be demonstrated as follows:
 USD: When the value of a foreign currency changes, it will cause the price of
gold valued in that currency to change with it as well. Currently, because USD is
a global legal tender, goods and transactions in the world are mainly valued in
USD, including gold, not to mention that people can also use gold as a hedge
against the depreciation of USD. So any impact that increases or decreases the
value of the dollar will also lead to the fluctuations in the price of gold. To be
more specific, the USD exchange rate has a direct yet negative relationship with
gold value. Generally, the mutual understanding of this relationship is the stronger
the US dollar appreciates, the lower the price of gold will be. On the other hand,
the weaker the US dollar is, the higher the price of gold will become.
 CPI: CPI is one of the most important indicators of inflation. Inflation is a
sustained increase in the general price level of goods and services in an economy
over some period of time. Gold is often used to hedge inflation because, unlike
paper money, since its supply remains unchanged year to year. Gold and inflation
are positively correlated. When the inflation rate rises, gold tends to rise, and
when inflation rate falls, gold tends to fall. Similarly, an increase/ decrease in CPI
will cause gold price to be higher/lower.
 Interest rates: Since Central bank decides to make interest rate decline, the
amount of money supply increases leading to the inflation which rises demand of
gold to protect assets from potential risk of inflation. Therefore, gold and interest
rates traditionally have a negative correlation. Which means the gold price goes
up as interest rates go down, and down as rates go up.
 Remittance: Remittance has a significant effect on an economy of a country since
it can reduce labor supply, increase the consumption of non-tradable goods, and
specially appreciate the real exchange rate. Additionally, the World Bank reported
that remittances currently account for around a third of overall financial inflows in
developing nations, including Vietnam. As a result, remittance and USD
exchange rate share a close correspondence. An increase in remittance motivates
an increase in USD exchange rate, then, adjusting for the growth of the gold price.
Likewise, a decrease in remittance is a cause of the fall of the price of gold
b) Research question: The factors that can affect gold prices & the definitions of such
variables:
Y: the dependent variable
 Gold price index indicates the changes in price of gold
X(s): the independent variables
 USD index indicates the changes in USD exchange rate
 CPI measures changes in the price level of a market basket of consumer goods
and services purchased by households
 Interest rate is the amount of interest due per period
& Remittance is a transfer of money, often by a foreign worker to an individual in
their home country.

3. Data:
a. Type of data: Time series
b. Structure: 1 - econometrics
c. Source of data: Secondary, retrieved from the General Statistics Office of
Vietnam (https://www.gso.gov.vn/default.aspx?tabid=628)

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