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Connectedness and risk transmission of China’s stock and currency markets with global commodities

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  • Huifu Nong

    (Guangdong Ocean University)

Abstract

This study investigates the transmission of risk shocks between China’s stock and currency markets with global commodities (including crude oil, natural gas, gold, silver, copper, palladium, and platinum) over time and across different frequencies, while accounting for the role of China’s economic policy uncertainty (EPU), from January 1, 2016, to June 30, 2022. Our findings reveal that both the time and frequency domain total connectedness index varies over time and suggest that both China’s stock and currency markets can provide more hedge advantage for turmoil periods. Return shocks between global commodities and China’s stock and currency markets have short-lasting effects when considering the frequency domain connectedness analysis. These return shocks typically originate from China’s stock market and currency and transmit to the commodity market, except for natural gas. Additionally, an increase in China’s EPU indicates bad news for the overall connectedness of all considered markets and the gold and silver markets.

Suggested Citation

  • Huifu Nong, 2024. "Connectedness and risk transmission of China’s stock and currency markets with global commodities," Economic Change and Restructuring, Springer, vol. 57(1), pages 1-24, February.
    • Handle: RePEc:kap:ecopln:v:57:y:2024:i:1:d:10.1007_s10644-024-09586-0
    DOI: 10.1007/s10644-024-09586-0
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    More about this item

    Keywords

    Financial market; Energy commodity; Precious metals; Connectedness measures; TVP; VAR model;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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