Bubble behaviors in lithium price and the contagion effect: An industry chain perspective

Xiao-Qing Wang, Meng Qin, Nicoleta-Claudia Moldovan and Chi-Wei Su

Resources Policy, 2023, vol. 83, issue C

Abstract: Ensuring the smooth operation of lithium market is crucial for the transition to cleaner sources of energy. From the perspective of boom-bust cycles in the Chinese lithium market, this study explores the existence of periodically bubble behaviors in lithium price utilizing the Generalized Supremum Augmented Dickey-Fuller method. The method delivers an innovative consistent date-stamping assessment for the exuberance and collapse of bubble episodes. We further investigate the interdependence and contagion effects of bubble behaviors in lithium industry chain. The results reveal that multiple bubbles in the Chinese lithium market are confirmed, which are basically accompanied by excess market fluctuations. The finding is consistent with the asset pricing model which implies both expected and invisible components exist in asset prices. The bubble contagion effect from lithium upstream to midstream is demonstrated, while the interdependence effect and bilateral contagion effect are confirmed within the same production stage in lithium industry chain. The findings provide important supporting basis for policymakers to gain a better insight into the dynamics of explosive behaviors in lithium industry chain and to construct preventive policies to maintain stable development of lithium market.

Keywords: Lithium price; Periodically collapsing behavior; Multiple bubbles; Contagion effect; Lithium industry chain (search for similar items in EconPapers)
JEL-codes: C22 L61 Q02 Q31 (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)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:83:y:2023:i:c:s0301420723004361

DOI: 10.1016/j.resourpol.2023.103725

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