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Integration and Risk Transmission in the Market for Crude Oil: A Time-Varying Parameter Frequency Connectedness Approach

Ioannis Chatziantoniou, David Gabauer and Rangan Gupta ()

No 202147, Working Papers from University of Pretoria, Department of Economics

Abstract: In this study, we investigate dynamic integration and risk transmission among a set of six well-established crude oil markets by combining frequency connectedness (Barunik and Krehlik, 2018) with the time-varying parameter connectedness approach (Antonakakis et al., 2020). Our study covers the period from May 1996 to December 2020 and focuses on crude oil price volatility. We measure connectedness for both a high and a low-frequency band. Findings are suggestive of relatively strong co-movements over time. For the most part of the sample period, connectedness occurs in the short-run; nonetheless, starting approximately in 2010, long-run connectedness gains much prominence until at least the end of 2015. Long-run connectedness is also prevalent at the beginning of 2020 caused by the COVID pandemic. We opine that periods of increased long-run connectedness relate to deeper changes in the market for crude oil that bring about new dynamics and associations within the specific network.

Keywords: World crude oil market; TVP-VAR; volatility spillovers; frequency connectedness (search for similar items in EconPapers)
JEL-codes: C32 F30 G10 Q43 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2021-06
New Economics Papers: this item is included in nep-ene, nep-net and nep-rmg
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