Volatility Integration of Gold and Copper with Foreign Exchange Rates

Copper and Gold today are some of the key metals in the metals and mining space especially due to the external events happening such as Covid-19 pandemic and Russia-Ukraine war. Also, the rupee-dollar exchange rate is highly volatile currently. The study's goal is to determine how copper and crude oil's shock volatility and price volatility affect the exchange rates between the rupee and the dollar. The study tries to find the correlation and mutual association between the metals (copper prices and gold prices) and foreign exchange rate. In order to establish such a relationship, bi-variate GARCH models (VEC GARCH and BEKK GARCH) are applied to sample data of the copper price, gold price, and foreign exchange rate (rupee-dollar) taken from the period 2005 to 2020 to determine a mutual correlation and volatility spillover effect in the metals and forex markets.