Time-frequency connectedness between energy and nonenergy commodity markets during COVID-19: Evidence from China. (September 2022)

• Record Type: Journal Article
• Authors: Chen, Hao; Xu, Chao; Peng, Yun
• Is Part Of: Resources policy. Volume 78(2022)
• Publication Date: 2022-09
• Subjects: Energy commodity in China -- Nonenergy commodity markets in China -- COVID-19 -- Time-frequency connectedness -- Portfolio design; Mines and mineral resources -- Periodicals; Ressources minérales -- Périodiques; Ressources naturelles -- Gestion -- Périodiques; Environnement -- Politique gouvernementale -- Périodiques; 333.8
• DOI: 10.1016/j.resourpol.2022.102874
• Languages: English
• ISSNs: 0301-4207

Abstract

Abstract: We aim to investigate the static and dynamic time-frequency connectedness between energy and nonenergy commodity markets in China during COVID-19 based on Baruník and Křehlík (2018) method. First, in this paper, we find that the short-term connectedness dominates the long-term one, and the total connectedness increases after the COVID-19 outbreak. Second, the energy commodity is the receiver and is influenced much by the spillovers of non-energy commodity markets (e.g. chemical commodities and non-ferrous metals) in the short run. At the same time, the impact is less at the long-term investment horizons. In addition, chemical commodities and soft commodities are the primary transmitters in this system in the short run. In contrast, chemical commodities and coal steel iron commodities are the main long-run primary transmitters. Third, the spillover role varies with the time-frequency domain during COVID-19. To be more specific, the energy commodity shows a net receiver role in the short and long run before the COVID-19 pandemic, but after it, the role of the net transmitter can be seen in the long run with ease. Finally, we show that COVID can reduce the hedging effectiveness at different investment horizons. The mineral policymakers should note our dynamic empirical results between energy and nonenergy commodity. Highlights: The static and dynamic time-frequency connectedness between energy and nonenergy commodity markets in China is investigated. The short-run spillovers dominate the long-run ones. In the short run, the energy commodity is influenced much by the spillovers of non-energy commodity markets. Chemical commodities are the primary transmitters in this system. COVID-19 can reduce the hedging effectiveness at different investment horizons.