Is there a relationship between economic growth and natural resource commodity price volatility? Evidence from China

Ru Zhang, Wenhao Zhao and Yong Wang

Resources Policy, 2024, vol. 88, issue C

Abstract: The volatility of commodity prices of natural resources such as oil and coal is closely related to the economic growth of a country. This study examines the volatility of economic growth and natural resource commodity prices in China during 1980–2020 and the causal relationship between them using the wavelet power spectrum and wavelet coherence in the wavelet method. The results reveal the following. (1) The wavelet power spectrum uncovers strong fluctuations in economic growth and natural resource commodity prices, both susceptible to crisis events. (2) The wavelet coherence demonstrates a significant causal relationship between economic growth and natural resource commodity price volatility. Specifically, (a) there is a notable negative correlation between economic growth and WTI crude oil prices and coal rents. (b) There is a two-way causal relationship between economic growth and WTI crude oil prices and coal rents, and a one-way causal relationship between economic growth and total natural resource rents and oil rents. Finally, using frequency-domain causality tests as a robustness check confirmed a long-term causal relationship between economic growth and natural resource commodity prices. This study clarifies the relationship between economic growth and natural resource commodity price volatility and provides a scientific basis for formulating natural resource and economic policies.

Keywords: Natural resources; Commodity prices; Economic growth; Wavelet power spectrum; Wavelet coherence (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:88:y:2024:i:c:s0301420723011029

DOI: 10.1016/j.resourpol.2023.104391

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