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Exploring the time and frequency domain connectedness of oil prices and metal prices

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  • Umar, Zaghum
  • Nasreen, Samia
  • Solarin, Sakiru Adebola
  • Tiwari, Aviral Kumar

Abstract

This paper explores the time and frequency domain connectedness between oil prices and metal prices for the period of 1980M1-2017M5. We employ DECO-GARCH model for equi-correlation among commodity under consideration, Diebold and Yilmaz (2014), for time domain, and Barunik and Krehlik (2017), for frequency domain (i.e., frequencies considered are: 1–4 months, 4–8 months, 8–15 months and more than 15 months) connectedness measures. The dynamic connectedness is examined by applying a rolling window method in time and frequency domain. Besides, network plots are also made based on the pair-wise net connectedness between the variables. The results for time domain analysis show that the overall connectedness of the system has been just 3.39%. The empirical results of frequency domain connectedness show that total connectedness varies at different frequencies. The maximum contribution is observed at short-term frequency, (1–4 months; 1.65%) and the lowest contribution at medium-term frequency (8–15 months; 0.45%.). The contribution from the highest frequency, which corresponds to more than 15 months’ period, is just 0.56%. The network analysis shows that Zinc is net receiver.

Suggested Citation

  • Umar, Zaghum & Nasreen, Samia & Solarin, Sakiru Adebola & Tiwari, Aviral Kumar, 2019. "Exploring the time and frequency domain connectedness of oil prices and metal prices," Resources Policy, Elsevier, vol. 64(C).
  • Handle: RePEc:eee:jrpoli:v:64:y:2019:i:c:s0301420718304458
    DOI: 10.1016/j.resourpol.2019.101516
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    Keywords

    Time and frequency domain connectedness; Network analysis; Oil prices; Metal prices;

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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