Dynamic Interlinkages Between Precious Metal, Exchange Rate and Crude Oil: Evidence from an Extended TVP‑VAR Analysis

In this study, we examine the dynamic connectedness among precious metals, exchange rates, and crude oil using daily data spanning from January 4, 2010, to May 10, 2023. To achieve this, we employ the time and frequency-dependent connectedness approaches. According to results, consistent with theoretical expectations, it becomes evident that global occurrences exert a substantial impact on the evolving interconnectedness of returns. As indicated by the average connectivity outcomes, silver and palladium emerge as the foremost propagators and recipients of return shocks, while Brent displays the lowest incidence of transmitting and receiving such shocks. Furthermore, gold, silver, and platinum are found as the primary sources of transmitting return shocks, whereas the remaining indices are identified as the main recipients of these shocks. Our results highlight the following: (i) the time-varying interconnectedness indices robustly capture significant financial/geopolitical events; (ii) on average, silver and palladium are the largest contributors of return shocks, while Brent has the lowest impact; (iii) gold, silver, and platinum act as net shock transmitters; (iv) short-term interconnectedness is more pronounced than persistent interdependencies; (v) frequency-dependent connectedness experience a significant surge during the announcement of the COVID-19 pandemic and the onset of the Russia-Ukraine conflict (RUC). In light of the conclusions drawn from the study, the findings underscore the evolving interconnectedness of returns among core precious metals, crude oil, and exchange rates amidst globalization. This dynamic environment not only presents opportunities for investors but also underscores the diffusion of risk across financial markets. Our findings provide policymakers with a broader economic outlook to improve both economic stability and energy-related policies.