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Dynamic linkages between international oil price, plastic stock index and recycle plastic markets in China

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  • Gu, Fu
  • Wang, Jiqiang
  • Guo, Jianfeng
  • Fan, Ying

Abstract

This paper empirically explores the time-varying co-movements between the international crude oil price, the prices of three common recycled plastics, i.e., recycled high-density polyethylene, polyethylene terephthalate, and polypropylene, and a synthesized index of the stock prices of public Chinese companies that manufacture plastic products, to unveil the market dynamics of recycled plastics in China. The analysis is carried out using a VAR-DCC-GARCH framework. The data spans from 4th Jan 2010 to 4th Jan 2018. The results show that the volatility spillovers from international oil market to Chinese recycled plastic market and plastic stocks are direct, though the impact of oil price returns on recycled plastic price returns is insignificant. We observe that online attention series are positively correlated to the linkages between oil price returns and plastic stock index returns, but are negatively correlated to the dynamic correlations of recycled plastic price returns and plastic stock index returns. The finding suggests that when the oil price and the performance of plastic manufacturers is highly related, these companies could be using virgin plastics as the major raw materials and paying more attention on the alternatives (i.e., recycled plastics) to improve their raw material portfolios to reduce related cost. Higher correlation between the recycled plastics price returns and the performance of plastic manufacturers implies that these companies could be using more recycled plastics, and the attention on plastic recycling is reduced.

Suggested Citation

  • Gu, Fu & Wang, Jiqiang & Guo, Jianfeng & Fan, Ying, 2020. "Dynamic linkages between international oil price, plastic stock index and recycle plastic markets in China," International Review of Economics & Finance, Elsevier, vol. 68(C), pages 167-179.
    • Handle: RePEc:eee:reveco:v:68:y:2020:i:c:p:167-179
    DOI: 10.1016/j.iref.2020.03.015
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