Climate policy uncertainty, oil price and agricultural commodity: From quantile and time perspective

Kai-Hua Wang, Jia-Min Kan, Lianhong Qiu and Shulin Xu

Economic Analysis and Policy, 2023, vol. 78, issue C, 256-272

Abstract: Climate policy uncertainty needs to be considered urgently in view of the fact that climate policy is affecting energy and agricultural markets. This paper uses quantile connectedness to examine the dynamic spillover among climate policy uncertainty (CPU), crude oil prices (COP) and agricultural product prices (APP), further revealing the impact of climate policy on markets in both normal and extreme markets. The results show that there is a higher connectedness level at extreme quantile. Uncertain climate policy activities and major events affect system connectedness. Further analysis shows that, compared with the isolated role in the normal market (median quantile), CPUs in the extreme market (lower and upper quantile) become continuous shock receivers in the system. The risk spillover mainly focused on soybeans and corn, and COP increased the risk of spillover especially after the epidemic. By revealing the transmission mechanism of the price correlation between oil and agricultural products under the CPU framework, this can fully explain the linkage between them. In general, the stability of the oil market and agricultural product market is crucial to the formulation of climate policy. These conclusions provide significant enlightenment for policy-makers and investors coping with the high level of CPU.

Keywords: Quantile dynamic connectedness; Climate policy uncertainty; Commodity futures; QTVP-VAR (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:78:y:2023:i:c:p:256-272

DOI: 10.1016/j.eap.2023.03.013

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