ABSTRACT
This research aims to analyze gold as a hedging instrument to overcome the inflation and exchange rate risk in three developing countries that have a majority population of Muslims, namely Turkey, Indonesia, and Malaysia. Using monthly data covering the period 2005–19, this paper applies the Granger Causality Test of Vector Error Correction Model (VECM) model. First, this paper finds that gold return, inflation, and changes in the exchange rate have long-term relationships. This study also finds that, in Turkey, gold can be a hedge tool against inflation risks but not for exchange rate risks. In contrast, in Indonesia, gold can be a hedge tool against exchange rate risks but not for inflation risks. Moreover, gold can be a hedge tool against exchange rate and inflation risks in Malaysia.
