How does China's crude oil futures affect the crude oil prices at home and abroad? Evidence from the cross-market exchange rate spillovers

Chuanwang Sun, Yiqi Peng and Yanhong Zhan

International Review of Economics & Finance, 2023, vol. 88, issue C, 204-222

Abstract: This study explores the cross-market relations among the prices of China's crude oil futures launched by the Shanghai International Energy Exchange (INE), China's domestic and foreign crude oil spots, and the USD against the RMB (USD/CNY) exchange rate. We emphasize the research of whether and how the RMB-denominated INE crude oil futures affect the exchange rate spillovers to China's domestic and foreign crude oil markets. With the construction of a theoretical framework and a Time-varying Parameter Structural Vector Autoregression Model with Stochastic Volatility (SV-TVP-SVAR) model, we find that: (1) The INE crude oil futures prices have close linkages with China's domestic crude oil spot prices but have insignificant and unstable spillovers on international crude oil prices, indicating that INE crude oil futures still have limited outward influence. (2) More importantly, the oil price-exchange rate nexus is diversified under different crude oil pricing currencies. The USD/CNY exchange rate shocks have negative spillovers on international crude oil denominated by USD while having positive spillover effects on INE crude oil futures denominated by RMB. (3) The USD/CNY exchange rate also positively influences China's domestic spot market via the spillovers of INE crude oil futures.

Keywords: Crude oil futures; Crude oil prices; Exchange rate; Cross-markets (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)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056023001818
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:204-222

DOI: 10.1016/j.iref.2023.06.013

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().