The prices of silver and exchange rates in a metallic monetary system—the cases of India and Iran

Using the notion of co-integration theory and a vector error correction modelling approach, this paper examines in retrospect the long-run relationship between the exchange rate of silver-based currencies and the intrinsic value of silver in India and Iran in a bivariate model. The results based on unit root and co-integration tests indicate a reliable long-run relationship between the price of silver and the exchange rate of silver-based currencies. Our findings also suggest a bi-directional relationship between the price of silver and exchange rate of pound per rupee in the case of India and a feedback relationship between the intrinsic value of qiran and the exchange rate of pound per qiran in the case of Iran.