Multivariate time series analysis of COVID-19 Pandemic and gold price by using Error Corrections Model

Abstract

Coronavirus (COVID-19) severe acute respiratory syndrome is an infectious disease that has a direct influence on the world’s population, as is obvious from the prevalence of COVID-19. However, as the COVID-19 virus continues to proliferate, its impact is becoming more and more significant and extensive. Accordingly, the study’s goal is to use the Error Corrections Model (ECM) to examine the relationships between the COVID-19 pandemic and gold prices. An Error Corrections Model was used by the researchers in this investigation. Error Correction Models and long-term equilibrium can be found for non-stationary time series that have been cointegrated together. Two-step estimation can be used to estimate the ECM since a proportion of the imbalance from one period is adjusted in the succeeding period, the system returns to equilibrium. The calculated cointegrating relations are used to create the error correction terms, and the estimation of VAR is done by a first differencing process, and then appears in the model as an explanatory variable, with the term of error correction. The COVID-19 pandemic and gold price data were made available to the general public in a sample data. For the year 2020, it includes data on daily observations for the relevant variables. R-language results show that the COVID-19 pandemic and gold prices have been demonstrated to have a long-term causal relationship. During the most recent period of variance decomposition, 99.76 percent of the variance in covid-19 explains only 0.24 percent of the variance in gold price. This explains that there is no short-term causal relationship between covid-19 and gold price, as indicated by the Wald test results, the granger causality results have shown that the gold price is influenced not only by itself but also by the Covid-19 pandemic. Finally, there is a positive relationship between the Covid-19 pandemic and the price of gold, and this has a negative impact on human life during 2020.

Keywords

• Multivariate time series
• ECM model
• VAR model
• cointegration technique
• IRF Analysis