Australian Dollars Exchange Rate and Gold Prices: An Interval Method Analysis

This paper proposes an interval method to explore the relationship between the exchange rate of Australian dollar against US dollar and the gold price, using weekly, monthly and quarterly data. With the interval method, interval sample data are formed to present the volatility of variables. The ILS approach is extended to multi-model estimation and the computational schemes are provided. The empirical evidence suggests that the ILS estimates well characterize how the exchange rate relates to the gold price, both in the long-run and short-run. The comparison between the interval and point method indicates that the difference between the OLS and the ILS estimates is increasing from weekly data to quarterly data, since the lowest frequency point data lost the most information of volatility.