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Dynamic Connectedness of International Crude Oil Prices: The Diebold–Yilmaz Approach

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  • Xiaoyong Xiao

    () (College of Economics and Management, Huazhong Agricultural University, Wuhan 430070, China)

  • Jing Huang

    () (College of Economics and Management, Huazhong Agricultural University, Wuhan 430070, China)

Abstract

Connectedness is the key to modern risk measurement and management. This study investigates the international connectedness of crude oil prices and explores its time-varying characteristics based on a connectedness measurement framework using daily international crude oil prices. The international connectedness of crude oil prices is investigated from three perspectives: total connectedness, total directional connectedness, and pairwise directional connectedness. We find that the total connectedness of crude oil prices is 67.3%. We also find that the crude oil prices of Tapes, Daqing, Dubai and Minas are highly affected by Brent and WTI (West Texas Intermediate) crude oil prices. Furthermore, WTI and Brent are the price makers of international crude oil prices, while Tapes, Daqing, Dubai and Minas are price takers. From the perspective of pairwise directional connectedness, we find that the degree of pairwise directional connectedness between Brent and WTI are high. Finally, the structure of international crude oil markets stays the same even after market shocks. The main contributions of this study are identification of dynamic connectedness and presentation of the network connectedness of international crude oil prices.

Suggested Citation

  • Xiaoyong Xiao & Jing Huang, 2018. "Dynamic Connectedness of International Crude Oil Prices: The Diebold–Yilmaz Approach," Sustainability, MDPI, Open Access Journal, vol. 10(9), pages 1-16, September.
  • Handle: RePEc:gam:jsusta:v:10:y:2018:i:9:p:3298-:d:169990
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    References listed on IDEAS

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    More about this item

    Keywords

    international crude oil price; total connectedness; total directional connectedness; pairwise directional connectedness; full sample; rolling sample;

    JEL classification:

    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q0 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General
    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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