The Russia-Ukraine conflict and volatility risk of commodity markets

Yi Fang and Zhiquan Shao

Finance Research Letters, 2022, vol. 50, issue C

Abstract: We construct a new index to measure the intensity of the Russia-Ukraine conflict and use it to examine to what extent and through which channels does this conflict affect the volatility risk of commodity markets. Our results suggest that the intensification of the Russia-Ukraine conflict significantly increases the volatility of agricultural, metal, and energy markets. The conflict affects these markets through both economic and financial channels. Regarding economic channels, after the escalation of conflict, the higher the global market share of a commodity exported by Russia, the higher the volatility risk for that commodity. Regarding financial channels, investor panic and the monetary policy of the major central banks amplify the impact of the Russia-Ukraine conflict. Commodity markets are more volatile when the Russia-Ukraine conflict escalates during periods when Russia's foreign exchange reserves are high.

Keywords: Russia–Ukraine conflict; Commodity market; Volatility risk; Geopolitical risk (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (77)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:50:y:2022:i:c:s154461232200455x

DOI: 10.1016/j.frl.2022.103264

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