Spillover and Drivers of Uncertainty among Oil and Commodity Markets

Muhammad Abubakr Naeem, Saqib Farid, Safwan Mohd Nor and Syed Jawad Hussain Shahzad
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Muhammad Abubakr Naeem: School of Economics and Finance, Massey University, Palmerston North 4442, New Zealand
Saqib Farid: School of Business and Economics, University of Management and Technology, Lahore 54770, Pakistan
Safwan Mohd Nor: Faculty of Business, Economics and Social Development, University of Malaysia Terengganu, 21030 Kuala Nerus, Terengganu, Malaysia

Mathematics, 2021, vol. 9, issue 4, 1-26

Abstract: The paper aims to examine the spillover of uncertainty among commodity markets using Diebold–Yilmaz approach based on forecast error variance decomposition. Next, causal impact of global factors as drivers of uncertainty transmission between oil and other commodity markets is analyzed. Our analysis suggests that oil is a net transmitter to other commodity uncertainties, and this transmission significantly increased during the global financial crisis of 2008–2009. The use of linear and nonlinear causality tests indicates that the global factors have a causal effect on the overall connectedness, and especially on the spillovers from oil to other commodity uncertainties. Further segregation of transmissions between oil to individual commodity markets indicates that stock market implied volatility, risk spread, and economic policy uncertainty are the influential drivers of connectedness among commodity markets.

Keywords: uncertainty transmission; commodities; nonlinear causality; global factors (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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