Commodity systemic risk and macroeconomic predictions

Ruolan Ouyang, Tiancheng Pei, Yi Fang and Yang Zhao

Energy Economics, 2024, vol. 138, issue C

Abstract: Commodity markets play an important role in shaping the world economy, while their inherent volatility poses significant economic hazards. This study explores the intricate relationship between commodity markets and the macroeconomy, focusing on intense price movements (commodity systemic risks). We aggregate 23 systemic risk measures, including left-tail (price drops) and right-tail (price surges), into three indices using quantile regression, examining their out-of-sample predictive capacities on G7 and BRICS countries. Our findings reveal asymmetric predictive capabilities, especially in downturns, and varying susceptibility across countries. Notably, G7 nations are more affected by either price surges or plunges, compared to BRICS countries. Additionally, countries' vulnerability to price fluctuations depends on their commodity dependence, urging tailored risk management strategies. Our results provide essential insights for risk management, aiding policymakers and market participants in understanding and mitigating the impacts of commodity systemic risk on their economies.

Keywords: Commodity market; Systemic risk; Quantile regression; Macroeconomy (search for similar items in EconPapers)
JEL-codes: C32 G32 Q02 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:138:y:2024:i:c:s0140988324005152

DOI: 10.1016/j.eneco.2024.107807

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