Exploring the dynamic interaction between geopolitical risks and lithium prices: A time-varying analysis

Xiaojing Zhang, Hsu-Ling Chang, Chi-Wei Su, Meng Qin and Muhammad Umar

Resources Policy, 2024, vol. 90, issue C

Abstract: Within the process of energy transition, lithium has emerged as a critical strategic resource, experiencing an unprecedented price surge. This paper aims to investigate the interplay between the international geopolitical landscape and the lithium market, specifically examining the potential politicisation of lithium. We utilize the bootstrap sub-sample method to evaluate the correlation between geopolitical risks (GPR) and lithium price (LP). The results demonstrate a two-way causality extends across diverse sub-samples, highlighting the intricate link between GPR and LP. Furthermore, we observe a dynamic interaction between GPR and LP, characterized by time-varying directional influences. At the beginning, a negative correlation between GPR and LP is identified, challenging the Intertemporal Capital Asset Pricing Model's predictions of their concurrent movement. Notably, in 2022, a positive influence from GPR on LP emerges, signaling an emerging political dimension within lithium markets. In the context of energy transition and geopolitical uncertainty, our findings emphasize the importance for policymakers and the public to consider diverse technological alternatives to reduce lithium dependency.

Keywords: Lithium prices; Geopolitical risks; Energy transition; Granger causal relation (search for similar items in EconPapers)
JEL-codes: G13 O13 Q41 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:90:y:2024:i:c:s0301420724002071

DOI: 10.1016/j.resourpol.2024.104840

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