Evidence of the internationalization of China's crude oil futures: Asymmetric linkages to global financial risks

Jiaming Zhang, Songlin Guo, Bin Dou and Bingyuan Xie

Energy Economics, 2023, vol. 127, issue PA

Abstract: Since its launch, China's crude oil futures (COIL) have gradually integrated with the international financial market but undoubtedly face more risks. For the purpose of exploring the influence mechanism between COIL and global risk, this paper uses a series of Granger causality tests to provide more evidence of COIL internationalization. In addition, we focus on exploring whether this influence mechanism has asymmetric characteristics. We choose a comprehensive new indicator, the Global Financial Risk Index (COVOL), to represent global financial risk, and also pay attention to three kinds of global risk refer to international energy, inflation, and financial system uncertainty. First, we find a marked asymmetry in the impact of global risks on COIL, especially energy-related risks, followed by financial system uncertainty. Second, COIL also has a significant asymmetric impact on global financial risks, including COVOL, GOIL, FSI, and EPU. Next, we further explore long-term and short-term changes in these asymmetric relationships. Empirical results have found that most asymmetric patterns exhibit long-term characteristics. Finally, given the potential impact of global extreme events, we provide an in-depth analysis of whether this asymmetric link still holds after the COVID-19 outbreak and the Russia-Ukraine conflict. These findings may provide important implications for improving coil market policy and related investment decisions.

Keywords: China's crude oil futures market; Asymmetric; Causality; Frequency domain; Global financial risk (search for similar items in EconPapers)
JEL-codes: C22 C58 G12 Q43 Q47 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:127:y:2023:i:pa:s0140988323005819

DOI: 10.1016/j.eneco.2023.107083

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