Gold price and exchange rate in pre and during Covid-19 period in India: Modelling dependence using copulas

This study examines the dynamic relationship between the gold price and the exchange rate in pre- and during Covid-19 pandemic in India. We consider the periods of about equal length for both the pre- and during Covid-19 by considering the data from January 1, 2019 till February 28, 2021. The descriptive analysis shows a significant increase in the dynamics of gold price and exchange rate after mid-March 2020. The results derived from the ARDL approach show a positive and significant relationship between the gold price and exchange rate both in the long and short run. We have selected the best fitted bivariate copula to study the joint distribution of the gold price and the exchange rate. Using the copula model, we examine the relationship between the gold price and exchange rate in a bivariate framework. We have studied the dependence between them including the tail dependencies using the fitted copula. Our findings reveal that the gold price and exchange rate are significantly correlated for the entire study period, and it also reveals that there is no tail dependence. However, the mutual association between the variables is not confirmed in the considered Covid-19 period. •Dynamic relationship between the gold price and exchange rate pre- and during Covid-19 pandemic in India is studied.•ARDL approach has been used to show the dynamic relationship between gold price and exchange rate.•Joint distribution of the gold price and exchange rate has been modeled and studied using bivariate copulas.•Dependence structure between the gold price and exchange rate has been studied based on the best-fitted copula.