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Global Oil Shocks and China’s Commodity Markets: The Role of OVX

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  • Xuejun Jin
  • Fangfei Zhu

Abstract

This paper investigates the effects of global oil shocks on the returns and volatilities of Chinese commodities from 1997 to 2016. We identify the different causes of oil shocks by using a structural vector autoregressive (SVAR) model. Particularly, we employ the crude oil volatility index (OVX) issued by the Chicago Board Options Exchange (CBOE) to proxy for the oil volatility shock and differentiate it from oil price shocks. Results indicate that both the responses of returns and volatilities of China’s commodities differ depending on the underlying causes of global oil shocks. Furthermore, the OVX shock has significant negative effects on the returns and positive effects on the realized volatilities of Chinese commodities, while the impacts of oil shocks caused by changes in oil supply and global economic activity are insignificant and negligible, especially after the 2008 financial crisis.

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  • Xuejun Jin & Fangfei Zhu, 2021. "Global Oil Shocks and China’s Commodity Markets: The Role of OVX," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(3), pages 914-929, February.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:3:p:914-929
    DOI: 10.1080/1540496X.2019.1658075
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    Cited by:

    1. Zhang, Chuanguo & Mou, Xinjie & Ye, Shuping, 2022. "How do dynamic jumps in global crude oil prices impact China's industrial sector?," Energy, Elsevier, vol. 249(C).

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