Dynamic connectedness across energy and metal futures markets during the COVID-19 pandemic: New evidence from a time-varying spillover index

The COVID-19 outbreak has greatly increased economic uncertainty worldwide and significantly impacted the markets for energy and metal futures. In order to capture the dynamic connectedness between the energy and metal futures markets for the period of January 3, 2013, to June 30, 2022, and to validate the mechanism by which COVID-19 affects spillover effects, this study combines a time-varying parametric vector autoregressive model with spillover effects. It is clear that there is a clear spillover effect in the energy and metal futures markets, showing time-varying characteristics, with fluctuations in the range of 35%–65%. The findings demonstrate that there are considerable spillover effects in the energy and metal futures markets, which fluctuate between 35% and 65% over time and are subject to unexpected events. Especially, the spillover network and dynamic spillover results indicate that during the COVID-19 outbreak, the spillover effect between the energy futures market and the metal futures market significantly increased. The mechanism analysis results indicate that COVID-19 influences the spillover effects between the energy and metal futures markets mostly through uncertainty and financial channel. Further research found that compared to normal market conditions, bullish and bearish market conditions had a greater impact on spillovers in the energy and metal futures markets.