Connectedness among Chinese climate policy uncertainty, exchange rate, Chinese and international crude oil markets: Insights from time and frequency domain analyses of high order moments

Wan-Lin Yan and Adrian (Wai-Kong) Cheung ()

The North American Journal of Economics and Finance, 2024, vol. 73, issue C

Abstract: This paper investigates the connectedness among the Chinese climate policy uncertainty, CNYUSD exchange rate, the Chinese crude oil and the international crude oil futures markets in terms of average return, volatility and high order moments. Meanwhile, different timescales and frequencies are also studied using Diebold and Yilmaz (2012) and Baruník and Křehlík (2018) approaches. The empirical results show that the connectedness among climate policy uncertainty, exchange rate and crude oil futures markets are time-varying and can be intensified by extreme events. The strength of connectedness depends on the moment order of spillovers. Covid-19 intensified the return, volatility and kurtosis connectedness. However, the impact of Covid-19 on higher order connectedness is relatively weak. In addition, the return spillovers are mainly caused by the short-term effect while higher order moment spillovers are driven by the long-term effect. Brent oil is the largest net shock transmitter and the Chinese crude oil futures mostly is the largest net shock receiver. Exchange rate is a net receiver except for kurtosis spillovers. The role of Chinese climate policy uncertainty is uncertain. In terms of the net pairwise connectedness, Chinese crude oil futures receives most shocks from Brent oil. In oil-exchange rate nexus, Chinese crude oil futures transmits shocks to the exchange rate in high order moment spillovers. The correlation between climate policy uncertainty and Chinese crude oil futures is time-varying. These findings offer useful implications for investors, policymakers and market supervisors.

Keywords: Risk spillovers; Oil market; Climate policy uncertainty; Exchange rate; Time-frequency domain (search for similar items in EconPapers)
JEL-codes: C32 O16 Q43 Q48 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:73:y:2024:i:c:s1062940824001001

DOI: 10.1016/j.najef.2024.102175

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