IDEAS home Printed from https://ideas.repec.org/a/eee/finlet/v67y2024ipbs1544612324009218.html
   My bibliography  Save this article

The impact of global uncertainties on the spillover among the European carbon market, the Chinese oil futures market, and the international oil futures market

Author

Listed:
  • Liu, Hong
  • Zhu, Yulin
  • Cui, Na
  • Zheng, Yan

Abstract

This paper employs the TVP-VAR-DY model to investigate the spillover among the European carbon market (EUA), the Chinese oil futures market (INE), and the Brent oil futures market (Brent) and explores whether their spillovers affect their volatility. Furthermore, we explore the impact of global uncertainties about the economy, finance, and geopolitics on their spillovers. The static analysis shows INE as a spillover receiver and EUA and Brent as transmitters. Dynamic analysis reveals spillover peaks during the COVID-19 pandemic. Furthermore, volatilities are positively influenced by spillovers among them. Finally, economic and financial uncertainties increase spillovers, while geopolitical uncertainties decrease them.

Suggested Citation

  • Liu, Hong & Zhu, Yulin & Cui, Na & Zheng, Yan, 2024. "The impact of global uncertainties on the spillover among the European carbon market, the Chinese oil futures market, and the international oil futures market," Finance Research Letters, Elsevier, vol. 67(PB).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009218
    DOI: 10.1016/j.frl.2024.105891
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1544612324009218
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.frl.2024.105891?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dario Caldara & Matteo Iacoviello, 2022. "Measuring Geopolitical Risk," American Economic Review, American Economic Association, vol. 112(4), pages 1194-1225, April.
    2. Diebold, Francis X. & Yılmaz, Kamil, 2014. "On the network topology of variance decompositions: Measuring the connectedness of financial firms," Journal of Econometrics, Elsevier, vol. 182(1), pages 119-134.
    3. Sun, Chuanwang & Min, Jialin & Sun, Jiacheng & Gong, Xu, 2023. "The role of China's crude oil futures in world oil futures market and China's financial market," Energy Economics, Elsevier, vol. 120(C).
    4. Ren, Xiaohang & An, Yaning & Jin, Chenglu, 2023. "The asymmetric effect of geopolitical risk on China's crude oil prices: New evidence from a QARDL approach," Finance Research Letters, Elsevier, vol. 53(C).
    5. Xu Gong & Keqin Guan & Qiyang Chen, 2022. "The role of textual analysis in oil futures price forecasting based on machine learning approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(10), pages 1987-2017, October.
    6. Geert Bekaert & Eric C. Engstrom & Nancy R. Xu, 2022. "The Time Variation in Risk Appetite and Uncertainty," Management Science, INFORMS, vol. 68(6), pages 3975-4004, June.
    7. Xu Gong & Mengjie Li & Keqin Guan & Chuanwang Sun, 2023. "Climate change attention and carbon futures return prediction," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 43(9), pages 1261-1288, September.
    8. Xiao, Jihong & Wang, Yudong & Wen, Danyan, 2023. "The predictive effect of risk aversion on oil returns under different market conditions," Energy Economics, Elsevier, vol. 126(C).
    9. Yang, Kun & Wei, Yu & Li, Shouwei & Liu, Liang & Wang, Lei, 2021. "Global financial uncertainties and China’s crude oil futures market: Evidence from interday and intraday price dynamics," Energy Economics, Elsevier, vol. 96(C).
    10. Adediran, Idris A. & Swaray, Raymond, 2023. "Carbon trading amidst global uncertainty: The role of policy and geopolitical uncertainty," Economic Modelling, Elsevier, vol. 123(C).
    11. Liu, Tangyong & Gong, Xu, 2020. "Analyzing time-varying volatility spillovers between the crude oil markets using a new method," Energy Economics, Elsevier, vol. 87(C).
    12. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    13. Wei, Yu & Wang, Yizhi & Vigne, Samuel A. & Ma, Zhenyu, 2023. "Alarming contagion effects: The dangerous ripple effect of extreme price spillovers across crude oil, carbon emission allowance, and agriculture futures markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    14. Zheng, Yan & Yin, Hua & Zhou, Min & Liu, Wenhua & Wen, Fenghua, 2021. "Impacts of oil shocks on the EU carbon emissions allowances under different market conditions," Energy Economics, Elsevier, vol. 104(C).
    15. Tan, Xueping & Sirichand, Kavita & Vivian, Andrew & Wang, Xinyu, 2020. "How connected is the carbon market to energy and financial markets? A systematic analysis of spillovers and dynamics," Energy Economics, Elsevier, vol. 90(C).
    16. Yu, Lean & Li, Jingjing & Tang, Ling & Wang, Shuai, 2015. "Linear and nonlinear Granger causality investigation between carbon market and crude oil market: A multi-scale approach," Energy Economics, Elsevier, vol. 51(C), pages 300-311.
    17. Nikolaos Antonakakis & Ioannis Chatziantoniou & David Gabauer, 2020. "Refined Measures of Dynamic Connectedness based on Time-Varying Parameter Vector Autoregressions," JRFM, MDPI, vol. 13(4), pages 1-23, April.
    18. Vellachami, Sanggetha & Hasanov, Akram Shavkatovich & Brooks, Robert, 2023. "Risk transmission from the energy markets to the carbon market: Evidence from the recursive window approach," International Review of Financial Analysis, Elsevier, vol. 89(C).
    19. Wang, Yizhi & Wei, Yu & Lucey, Brian M. & Su, Yang, 2023. "Return spillover analysis across central bank digital currency attention and cryptocurrency markets," Research in International Business and Finance, Elsevier, vol. 64(C).
    20. Huang, Yisu & Xu, Weiju & Huang, Dengshi & Zhao, Chenchen, 2023. "Chinese crude oil futures volatility and sustainability: An uncertainty indices perspective," Resources Policy, Elsevier, vol. 80(C).
    21. Xiaohang Ren & Yue Dou & Kangyin Dong & Yiying Li, 2022. "Information spillover and market connectedness: multi-scale quantile-on-quantile analysis of the crude oil and carbon markets," Applied Economics, Taylor & Francis Journals, vol. 54(38), pages 4465-4485, August.
    22. Xiaohang Ren & Ya Xiao & Feng He & Giray Gozgor, 2024. "The contagion of extreme risks between fossil and green energy markets: evidence from China," Quantitative Finance, Taylor & Francis Journals, vol. 24(5), pages 627-642, May.
    23. Scott R. Baker & Nicholas Bloom & Steven J. Davis & Kyle J. Kost, 2019. "Policy News and Stock Market Volatility," NBER Working Papers 25720, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Assaf, Ata & Charif, Husni & Mokni, Khaled, 2021. "Dynamic connectedness between uncertainty and energy markets: Do investor sentiments matter?," Resources Policy, Elsevier, vol. 72(C).
    2. Wei, Yu & Wang, Yizhi & Vigne, Samuel A. & Ma, Zhenyu, 2023. "Alarming contagion effects: The dangerous ripple effect of extreme price spillovers across crude oil, carbon emission allowance, and agriculture futures markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    3. Lei, Heng & Xue, Minggao & Ye, Jing, 2024. "The nexus between ReFi, carbon, fossil energy, and clean energy assets: Quantile time–frequency connectedness and portfolio implications," Energy Economics, Elsevier, vol. 132(C).
    4. Feng, Huiqun & Zhang, Jun & Guo, Na, 2023. "Time-varying linkages between energy and stock markets: Dynamic spillovers and driving factors," International Review of Financial Analysis, Elsevier, vol. 89(C).
    5. Lang, Chunlin & Xu, Danyang & Corbet, Shaen & Hu, Yang & Goodell, John W., 2024. "Global financial risk and market connectedness: An empirical analysis of COVOL and major financial markets," International Review of Financial Analysis, Elsevier, vol. 93(C).
    6. Lucey, Brian & Ren, Boru, 2023. "Time-varying tail risk connectedness among sustainability-related products and fossil energy investments," Energy Economics, Elsevier, vol. 126(C).
    7. Chen, Huayi & Shi, Huai-Long & Zhou, Wei-Xing, 2024. "Carbon volatility connectedness and the role of external uncertainties: Evidence from China," Journal of Commodity Markets, Elsevier, vol. 33(C).
    8. Zhang, Jiahao & Zhang, Yifeng & Wei, Yu & Wang, Zhuo, 2024. "Normal and extreme impact and connectedness between fossil energy futures markets and uncertainties: Does El Niño-Southern Oscillation matter?," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 188-215.
    9. Dunbar, Kwamie, 2023. "CBDC uncertainty: Financial market implications," International Review of Financial Analysis, Elsevier, vol. 87(C).
    10. Yang, Ming-Yuan & Chen, Zhanghangjian & Liang, Zongzheng & Li, Sai-Ping, 2023. "Dynamic and asymmetric connectedness in the global “Carbon-Energy-Stock” system under shocks from exogenous events," Journal of Commodity Markets, Elsevier, vol. 32(C).
    11. Gong, Xu & Xu, Jun, 2022. "Geopolitical risk and dynamic connectedness between commodity markets," Energy Economics, Elsevier, vol. 110(C).
    12. Sevillano, María Caridad & Jareño, Francisco & López, Raquel & Esparcia, Carlos, 2024. "Connectedness between oil price shocks and US sector returns: Evidence from TVP-VAR and wavelet decomposition," Energy Economics, Elsevier, vol. 131(C).
    13. Szafranek, Karol & Rubaszek, Michał & Uddin, Gazi Salah, 2024. "The role of uncertainty and sentiment for intraday volatility connectedness between oil and financial markets," Energy Economics, Elsevier, vol. 137(C).
    14. Niu, Hongli & Hu, Wenwen, 2024. "Static and dynamic interdependencies among natural gas, stocks of global major economies and uncertainty," Resources Policy, Elsevier, vol. 94(C).
    15. Foglia, Matteo & Palomba, Giulio & Tedeschi, Marco, 2023. "Disentangling the geopolitical risk and its effects on commodities. Evidence from a panel of G8 countries," Resources Policy, Elsevier, vol. 85(PB).
    16. Zhang, Hongwei & Zhang, Yubo & Gao, Wang & Li, Yingli, 2023. "Extreme quantile spillovers and drivers among clean energy, electricity and energy metals markets," International Review of Financial Analysis, Elsevier, vol. 86(C).
    17. Chen, Xiuwen & Yao, Yinhong & Wang, Lin & Huang, Shenwei, 2024. "How EPU, VIX, and GPR interact with the dynamic connectedness among commodity and financial markets: Evidence from wavelet analysis," The North American Journal of Economics and Finance, Elsevier, vol. 74(C).
    18. He, Xie & Hamori, Shigeyuki, 2024. "Asymmetric Higher-Moment spillovers between sustainable and traditional investments," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 97(C).
    19. Al-Shboul, Mohammad & Assaf, Ata & Mokni, Khaled, 2023. "Does economic policy uncertainty drive the dynamic spillover among traditional currencies and cryptocurrencies? The role of the COVID-19 pandemic," Research in International Business and Finance, Elsevier, vol. 64(C).
    20. Liu, Xi & Zhang, Xueyong, 2024. "Geopolitical risk and currency returns," Journal of Banking & Finance, Elsevier, vol. 161(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:finlet:v:67:y:2024:i:pb:s1544612324009218. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/frl .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.