Dynamic volatility contagion across the Baltic dry index, iron ore price and crude oil price under the COVID-19: A copula-VAR-BEKK-GARCH-X approach

Yufeng Chen, Jing Xu and Jiafeng Miao

Resources Policy, 2023, vol. 81, issue C

Abstract: The international dry bulk shipping market is closely related to the commodity and crude oil markets. At the same time, the Baltic Dry Index (BDI) is usually considered as the main indicator of economic activities. In order to clarify the correlations between the three markets, this paper employs the Copula-VAR-BEKK-GARCH-X model to explore the dynamic dependence and volatility spillovers between the Baltic Dry Index, iron ore price and Brent crude oil price. In addition, the influence of exogenous variables (BDI/Iron ore/Brent) on market volatility and co-volatility is further discussed. The empirical results indicate that: first, the dependence between BDI, iron ore price and Brent crude oil price is time-varying and time-lag, especially when suffering from major crises. Second, dynamic dependencies and volatility spillovers between BDI, iron ore price and Brent crude oil price have significantly strengthened during COVID-19, manifesting that the impact of market turmoil has reinforced the linkages between markets. Third, this paper reaffirms the role of BDI as an intra and inter market indicator, while finding indication that iron ore is beginning to emerge its predictive indicator post-COVID-19. The results are not only conducive to the investment portfolio selection of individual investors and institutional investors, but also beneficial to formulating trade policies or shipping strategies by countries or shipping organizations.

Keywords: Dynamic dependence; Volatility spillover; Exogenous shock; COVID−19; Copula-VAR-BEKK-GARCH-X model (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:81:y:2023:i:c:s0301420723000041

DOI: 10.1016/j.resourpol.2023.103296

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