Bubble behaviors in nickel price: What roles do geopolitical risk and speculation play?

Xiao-Qing Wang, Tong Wu, Huaming Zhong and Chi-Wei Su

Resources Policy, 2023, vol. 83, issue C

Abstract: The stable operation of nickel market provides essential safeguard for the realization of global sustainable energy transition. In the context of prominent geopolitical risks and financial market instability, the explosive dynamics of nickel market price have not been thoroughly investigated. From a boom-bust cycle perspective, this study examines the existence of periodically bubble behaviors in nickel price utilizing the Generalized Supremum Augmented Dickey-Fuller method. The method delivers an innovative consistent date-stamping assessment for the exuberance and collapse of bubble episodes. This paper further probes into the effects of geopolitical risk, speculations, demand, supply and dollar on bubbles through logistic technique. The results find that four boom-bust cycles in nickel price are detected during 1990–2022, which are basically accompanied by extreme market volatility. This finding is in line with the asset pricing model which implies both expected and invisible components exist in asset price. In terms of macroeconomic determinants, nickel demand positively affects the boom-bust behaviors, while nickel supply and dollar dynamics have a negative impact on bubble occurrence. Particularly, geopolitical risk and speculations are proven to be important drivers in boosting the explosiveness of bubbles. To counter the hazardous economic consequences of bubble collapse, policymakers should formulate precautionary policies in the face of complicated geopolitical landscape and volatile capital market environment.

Keywords: Nickel price; Boom-bust cycles; Multiple bubbles; Geopolitical risk; Speculation (search for similar items in EconPapers)
JEL-codes: C22 L61 Q02 Q34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:83:y:2023:i:c:s030142072300418x

DOI: 10.1016/j.resourpol.2023.103707

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