Extreme risk contagion between international crude oil and China's energy-intensive sectors: New evidence from quantile Granger causality and spillover methods

Bin-xia Chen and Yan-lin Sun

Energy, 2023, vol. 285, issue C

Abstract: We use quantile Granger causality and quantile spillover indices to analyze the connectedness of returns and volatility between crude oil and China's energy-intensive sectors (steel, electricity, coal, and petrochemical). The results show that both the strength and the direction of the connectedness are related to financial conditions (measured by quantiles), with the tail quantiles having much stronger connectedness than the middle level. Bidirectional Granger causality between crude oil and energy-intensive sectors occurs in the left (right) tail of returns as well as in the right tail of volatility. According to the quantile spillover indices, the spillover indices of crude oil's return and volatility are 2.79 % and 0.09 %, respectively, in the median condition, while they are as high as 71.09 % and 287.42 %, respectively, in the extreme condition. We emphasize that the volatility contagion from crude oil to energy-intensive sectors is significant only in the right tail quantiles. Among different sectors, the strongest connectedness between crude oil and the coal sector is observed at the extremes, followed by the petrochemical sector. The impact of China's energy-intensive sectors on the crude oil market deserves attention, as crude oil is a net receiver of information from China's energy-intensive sectors during certain periods.

Keywords: International crude oil market; China's energy-intensive sectors; Extreme risk contagion; Quantile spillover effect; Quantile Granger causality (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0360544223028621
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:285:y:2023:i:c:s0360544223028621

DOI: 10.1016/j.energy.2023.129468

Access Statistics for this article

Energy is currently edited by Henrik Lund and Mark J. Kaiser

More articles in Energy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().