Risk Contagion between Global Commodities from the Perspective of Volatility Spillover

Hong Shen, Qi Pan, Lili Zhao and Pin Ng
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Hong Shen: School of Business, Yangzhou University, Yangzhou 225127, China
Qi Pan: School of Business, Yangzhou University, Yangzhou 225127, China
Lili Zhao: School of Business, Yangzhou University, Yangzhou 225127, China
Pin Ng: WA Franke College of Business, Northern Arizona University, Flagstaff, AZ 86011, USA

Energies, 2022, vol. 15, issue 7, 1-21

Abstract: Prices of oil and other commodities have fluctuated wildly since the outbreak of the COVID-19 pandemic. It is crucial to explore the causes of price fluctuations and understand the source and path of risk contagion to better mitigate systemic risk and maintain economic stability. The paper adopts the method of network topology to examine the path of risk contagion between China’s and foreign commodities, focusing on the dynamic evolution and transmission mechanism of risk contagion during the pandemic. This research found that among China’s commodities, energy, grain, and textiles are net recipients of risk contagion, while chemical products and metals are net risk exporters. Among international commodities, industries have positive risk spillover effects on metals and textiles. During the first phase of the pandemic, China’s commodities were the main exporters of risk contagion. However, international industries and metals became the main risk exporters and exerted risk spillover on China’s commodities in the second phase of the pandemic. Moreover, based on total volatility spillover index of commodities, the risk contagion among the commodities follows three paths: “interest rate → commodities → money supply”, “China’s economic expectation → commodities → foreign economic expectation”, and “commodities → consumer confidence”.

Keywords: volatility spillover; commodities; COVID-19; risk contagion (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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