Strategic Risk Spillovers from Rare Earth Markets to Critical Industrial Sectors

Oana Panazan and Catalin Gheorghe ()
Additional contact information
Oana Panazan: Department of Engineering and Industrial Management, Transilvania University of Brasov, Romania, Eroilor Street 29, 500036 Brasov, Romania
Catalin Gheorghe: Department of Engineering and Industrial Management, Transilvania University of Brasov, Romania, Eroilor Street 29, 500036 Brasov, Romania

IJFS, 2025, vol. 13, issue 3, 1-31

Abstract: This study investigates the nonlinear, regime-dependent, and frequency-specific interdependencies between rare earth element (REE) markets and key global critical sectors, including artificial intelligence, semiconductors, clean energy, defense, and advanced manufacturing, under varying levels of geopolitical and financial uncertainty. The main objective is to assess how REE markets transmit and absorb systemic risks across these critical domains. Using a mixed-methods approach combining Quantile-on-Quantile Regression (QQR), Continuous Wavelet Transform (CWT), and Wavelet Transform Coherence (WTC), we examine the dynamic connections between two REE proxies, SOLLIT (Solactive Rare Earth Elements Total Return) and MVREMXTR (MVIS Global Rare Earth Metals Total Return), and major sectoral indices based on a dataset of daily observations from 2018 to 2025. Our results reveal strong evidence of asymmetric, regime-specific risk transmission, with REE markets acting as systemic amplifiers during periods of extreme uncertainty and as sensitive receptors under moderate or localized geopolitical stress. High co-volatility and persistent low-frequency coherence with critical sectors, especially defense, technology, and clean energy, indicate deeply embedded structural linkages and a heightened potential for cross-sectoral contagion. These findings confirm the systemic relevance of REEs and underscore the importance of integrating critical resource exposure into global supply chain risk strategies, sector-specific stress testing, and national security frameworks. This study offers relevant insights for policymakers, risk managers, and institutional investors aiming to anticipate disruptions and strengthen resilience in critical industries.

Keywords: rare earth element; volatility spillovers; critical sectors; wavelet coherence; quantile-on-quantile regression (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7072/13/3/156/pdf (application/pdf)
https://www.mdpi.com/2227-7072/13/3/156/ (text/html)

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:gam:jijfss:v:13:y:2025:i:3:p:156-:d:1731900

Access Statistics for this article

IJFS is currently edited by Ms. Hannah Lu

More articles in IJFS from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().