Spillover effects between commodities and the Australian dollar

Peter Albrecht ()

No 2023-88, MENDELU Working Papers in Business and Economics from Mendel University in Brno, Faculty of Business and Economics

Abstract: The paper investigates the volatility spillover effects between commodities exported by Australia and the Australian dollar. These findings give better information about the transmissions of shocks between commodities and the Australian currency. We find that the spillover effects on the Australian dollar are more connected to herd behaviour than to export commodities. The research is carried out using a time-varying approach as per the methodology used by Diebold and Yilmaz (2009). We identify the commodities that transmit volatility to the currency but also the currencies that obtain volatility from Australian dollar. Further, we bring evidence that the AUD reacts more quickly to shocks than the commodities but over the longer term it obtains volatility from these commodities during periods of economic turbulence. The study provides specific investment recommendations for investors whose assets are held in AUD.

Keywords: Spillovers; connectedness; commodities; exchange rates (search for similar items in EconPapers)
JEL-codes: C18 C58 F31 G15 Q02 (search for similar items in EconPapers)
Pages: 23
Date: 2023-03
New Economics Papers: this item is included in nep-opm
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