How geopolitical risk drives spillover interconnectedness between crude oil and exchange rate markets: Evidence from the Russia-Ukraine war

Obaika M. Ohikhuare

Resources Policy, 2023, vol. 86, issue PB

Abstract: This study examines the dynamics of spillover interconnectedness between oil and exchange rate market in the purview of the Russia-Ukraine war. The study employed the Time-Varying Parameters Vector-Autoregression (TVP-VAR) model to investigate the connectedness between the aforementioned markets in three segments: before, during and the full sample. The TVP-VAR results reveal two exciting findings: First, the market connectedness increased from pre-war to higher levels. Second, the pattern of risks and opportunities transmission across these markets can change in the outbreak of geopolitical conflict. Furthermore, the study employed causality-in-quantile and quantile regression methodologies to formally establish that geopolitical risk may drive market risks and opportunities spillover. The causality-in-quantile test suggests that geopolitical risk could predict the total and net directional spillover behaviour between the markets before and during the war. On the other hand, the quantile regression results revealed that geopolitical risks have varying and substantial relationships with the total and net directional connectedness of the oil and exchange rate markets before and during the war. These findings have important policy implications for policymakers and market participants.

Keywords: Crude oil and exchange rate markets; Geopolitical risks; Spillover drivers; Nonlinearity; Regression (search for similar items in EconPapers)
JEL-codes: C32 D53 F31 Q02 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0301420723009935
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:jrpoli:v:86:y:2023:i:pb:s0301420723009935

DOI: 10.1016/j.resourpol.2023.104282

Access Statistics for this article

Resources Policy is currently edited by R. G. Eggert

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