BUS150 Introduction to Business Studies 2021-22

SEMINAR 7: LITERATURE REVIEW

Seminar Activity: Assessing literature reviews

Read the following extract from a literature review in an academic journal article.
Then, in your breakout groups, discuss the following questions:
1. Is it well organised and structured? Explain.
2. Do the authors comprehensively cover the existing research on the topic?
3. Do the authors critically evaluate existing research on the topic? Provide examples.
4. Do the authors identify and address gaps in the existing literature? Provide evidence.
5. Is there evidence that the authors own research is significantly contributing to a
particular research area? Explain.
6. Finally, is there anything you would do to improve upon this literature review?

From: Conlon, T., Lucey, B.M. and Uddin, G.S., 2018. Is gold a hedge against inflation? A
wavelet time-scale perspective. Review of Quantitative Finance and Accounting, 51(2),
pp.317-345.
A number of theoretical arguments have been proposed, to explain why one might expect
to find a relationship between gold and inflation. Feldstein (1980) proposes a model in
which stores of value, such as land and gold, have a positive price relationship with expected
inflation, a consequence of limits to potential supply. Fortune (1987) suggests that the
relationship between gold and inflation is driven by a substitution effect, where investors
convert assets with a fixed nominal return into gold due to expectations of increased
inflation. More recently, Faria and McAdam (2012) propose a model of the gold standard,
where prices and holdings of gold are related to demographics and scarcity. Detailing a
dynamic model, they also find that the gold standard implies deflation unless the rate of
gold extraction exceeds population growth.
The relationship between gold and inflation has also been considered empirically in various
studies, with particular focus on US inflation. Throughout much of the extant literature, a
common theme has been the application of cointegration methods to assess the ability of
gold to hedge against inflation. Considering an extensive dataset for the US and UK
beginning in 1791, Bampinas and Panagiotidis (2015) provide evidence of a timevarying
cointegrating relationship between gold and inflation, very much in the long-run given the
dataset. Batten et al. (2014) by contrast demonstrate no cointegrating relationship between
gold and inflation once the volatile phase of the early 1980s is excluded, but witness an
increase in comovement in recent times. Using a Markov-switching error correction model
for four major economies, Beckmann and Czudaj (2013) find that gold is a partial hedge for

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 BUS150 Introduction to Business Studies 2021-22

future inflation in the long-run for certain regimes. Wang et al. (2011) apply a threshold
vector error correlation model allowing for threshold cointegration in the long-run, finding
that gold acts as a short-run hedge against inflation during times of high momentum. Using
a cointegration approach, Sjaastad and Scacciavillani (1996) also finds a strong hedging
relationship between gold and inflation. In contrast, Sjaastad (2008) contradict this finding
using data from 1991 through 2004, demonstrating the importance of considering the
hedging capabilities of gold dynamically. While many of these studies allow for long- and
short-run relationships, only Bampinas and Panagiotidis (2015) and Batten et al. (2014)
consider the time-varying nature of the relationship in detail. In this study, we build on
these findings by simultaneously considering the relationship between gold and inflation for
different frequencies at each point in calendar time.

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