Empirical Analysis of the Relationship between Global Gold Prices, the U.S. Supplemental Nutrition Assistance Program Expenditures and Baltic Dry Index

Abstract

This article empirically analyzes the relationship between the global gold price changes and the U.S. Supplemental Nutrition Assistance Program (SNAP) Expenditures, along with Baltic Dry Index (BDI). Based on the data between 1988 and 2012, the ARDL Bounds cointegration analysis indicates that the global gold prices are significantly and positively related with SNAP expenditures both in short and long term, while it is positively yet much less significantly related with BDI only in the short term. Toda-Yamamoto Test indicates one-way causality from SNAP to gold prices. In sum, the increase in the poverty level in the U.S. causes the increase in the global gold prices. This study provides a new empirical evidence as to how the economic condition of the U.S. affects the global economy. The positive relationship between BDI and gold prices in the short term may be explained by the case that the plentiful liquidity as a result of economic revival may be heading to gold investment, causing the increase in the price.