A Study On The Asymmetric Effect Of Crude Oil To Precious Metals Based On Beyesian MS-VAR Model

Precious Metal, as a part of the state-owned assets, is an important factor in national economic development and directly related to the normal operation of the country's core industries. Oil is an important commodity and its production and supply plays an important role in social and economic development. China is the main importer and consumer of precious metals and crude oil, and changes in crude oil prices will have a significant impact on China's economic development. Because the relationship between variables is often exhibit non-linear relationship in economic system environment, the non-linear econometric models to depict the relationship between variables can better reveal the laws of economic operation. Therefore, this study, based on Bayesian theory, is to construct a Bayesian nonlinear mechanism MS-VAR model to study the dynamic relationship between international crude oil market and precious metals market price and the fluctuations of its characteristics between the two markets.First, this study follows the outline from the theory to model building, and then the model is applied to the whole idea of the crude oil market and precious metals market empirical analysis. First, the present study analyzes the theory of price fluctuations of crude oil and precious metals, and transmission mechanism from crude oil market price volatility to the changes of precious metals price, and nonlinear time series model and its test methods, and describes the estimation of Bayesian inference theory. Second, we modeling Markov-switching autoregression (MS-VAR), and based on the model we analyzed bayesian statistical inference to build the bayesian MS-VAR. Finally, the bayesian MSVAR model is applied to examine the dynamic relationship in the two markets between international crude oil and precious metals. In the study, we build two models which include gold futures and silver futures to crude oil, respectively. According to estimation results of parameters, we analyze the asymmetrics effect of oil price on precious metals futures and compare the dynamics of oil prices on the gold futures and silver futures as well as the effect of different correlation coefficients.This article has the following results. Firstly, the fluctuation of international crude oil price is the most dramatic, followed by silver futures and gold futures the smallest fluctuations. Secondly, the relationship between the international price of crude oil and precious metals futures present structure changes, indicating that crude oil prices and futures prices of precious metals exhibit non-linear relationship. By the estimation results of model parameter, the international crude oil price has a positive and an asymmetric effect on the gold futures price. Similarly, the international crude oil price has a positive role in promoting the increase of silver futures price, and crude oil price also has an asymmetrical effect on silver futures price. However, there are different reactions of crude oil price to gold futures and silver futures. The result shows that the reaction of silver futures price on the changes of international crude oil price is more intense reaction.