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Does economic, political, and financial risk cause volatility in natural resources? Comparative study of China and Brazil

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  • Lei, Wei
  • Yang, Jiaxin

Abstract

The wide range of natural resource usage in economic, political and financial plans requires a complete assessment in economies like China and Brazil in order to design long-term strategies for economic stability and progress that contribute to global wealth. To serve this purpose, this study analyzes the impact of risk on volatility in natural resources in case of Brazil and China. The purpose is to make a comparative analysis of the two major economies such as Brazil and China. To serve this purpose, we employ Frequency Domain Causality (FDC) test, which can check the causal nexus between variables at three different runs. Our findings suggest that political risk index, economic and financial risks granger cause natural resource volatility at all three runs in Brazil. In case of China, economic and financial risk granger cause natural resource volatility at all three runs. However, political risk index causes natural resource volatility only in medium run to long run. In short run, PRI does not cause natural resource volatility. To sum up, this study concludes that economic, financial and political risks are considered leading challenges with significant implications for natural resource rents in Brazil and China. This study proposes that Brazil and China need to provide the foundation for sustainable development and poverty eradication by managing natural resources responsibly.

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  • Lei, Wei & Yang, Jiaxin, 2022. "Does economic, political, and financial risk cause volatility in natural resources? Comparative study of China and Brazil," Resources Policy, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:jrpoli:v:77:y:2022:i:c:s030142072200157x
    DOI: 10.1016/j.resourpol.2022.102709
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