EconPapers    
Economics at your fingertips  
 

Does strategic commodities price respond to U.S. Partisan Conflict? Evidence from a parametric test of Granger causality in quantiles

Yong Jiang

Papers from arXiv.org

Abstract: Currently, U.S. politics have been characterized by a high degree of partisan conflict, which has led to increasing polarization and high policy uncertainty. Given the importance of U.S. in the global commodity market, we investigate whether U.S. partisan conflict affects the price performance (returns and volatility) of two strategic commodities (oil and gold). To this end, we employ a parametric test of Granger causality in quantiles proposed by Troster (2016), which can discriminate between causality affecting the median and the tails of the conditional distribution. Meanwhile, this approach allows us to investigate whether there exist different effects of U.S. partisan conflict index on the oil market and gold market under different market conditions. The empirical results suggest that U.S. partisan conflict can affect the returns of oil and gold, with the effects cluster around the tail of the conditional distribution of returns. More specifically, the partisan conflict mainly affects the oil returns when the crude oil market is in a bearish state (lower quantiles). By contrast, partisan conflict matters for gold returns only when the gold market is in a bullish scenario (higher quantiles). In addition, for the volatility of oil and gold, the predictability of partisan conflict index virtually covers the entire distribution of volatility. This study provides valuable implications for academics, policymakers, and investors.

New Economics Papers: this item is included in nep-ene and nep-pol
Date: 2018-10
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1810.08396 Latest version (application/pdf)

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:arx:papers:1810.08396

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2018-11-20
Handle: RePEc:arx:papers:1810.08396