Asymmetric Dynamic Linkages and Shock Spillover between Shipping and Commodity (Metal and Agricultural) Markets: Evidence from a Novel Method

49 Pages Posted: 7 Dec 2022

See all articles by Adeolu O. Adewuyi

Adeolu O. Adewuyi

University of Ibadan

Musefiu A. Adeleke

University of Ibadan - Faculty of Public Health

Aviral Kumar Tiwari

Indian Institute of Management Bodh Gaya

Emmanuel Joel Aikins Abakah

University of Ghana - University of Ghana Business School (UGBS)

Abstract

This study extends the existing literature in this area by examining the connectedness and shock spillover between commodity and shipping markets using a new novel time-varying quantile and frequency connectedness method developed by Chatziantoniou et al (2022) based on B&K (2018) and Ando et al (2018). Connectedness and shock transmission between the markets were analysed with daily data covering July 4, 2012 to July 20, 2022. A major value added of this study to the existing literature is the examination of the asymmetric effect of commodity price changes (or return) on the connectedness of the markets. Mean-frequency total connectedness analysis indicates that, the overall shipping market (BDI) is both the transmitter (to) and receiver of the highest shock from the entire market connectedness system. In the short-term, the agricultural markets dominate as both the transmitters and receivers of the major shocks to and from the entire market system, while in the medium-term, the shipping markets dominate as both the transmitters and receivers of the largest shocks to the entire market system. However, in the long-term, connectedness and shock propagation were very low. The time-varying quantile analysis reveals that, connectedness was very strong before, during and after COVID-19 at the bearish and bullish market conditions. Further, the time-varying frequency connectedness analysis shows that, although total connectedness is relatively high overtime, it was propelled by short-term dynamics. Metal markets are connected among themselves, and with both agricultural and shipping markets. Agricultural markets are connected among themselves, and with shipping markets, which are only connected among themselves. There is evidence of the asymmetric effect of commodity return dynamics on the connectedness of the markets. Some important policy recommendations were drawn from the findings.

Keywords: Shock transmissions, Shipping markets, commodity markets, Quantile VAR models, Asymmetric connectedness effects

Suggested Citation

O. Adewuyi, Adeolu and Adeleke, Musefiu A. and Tiwari, Aviral Kumar and Abakah, Emmanuel Joel Aikins, Asymmetric Dynamic Linkages and Shock Spillover between Shipping and Commodity (Metal and Agricultural) Markets: Evidence from a Novel Method. Available at SSRN: https://ssrn.com/abstract=4287350 or http://dx.doi.org/10.2139/ssrn.4287350

Adeolu O. Adewuyi (Contact Author)

University of Ibadan ( email )

Department of Economics
Ibadan, OK Oyo State 900001
Nigeria

Musefiu A. Adeleke

University of Ibadan - Faculty of Public Health ( email )

University of Ibadan
Ibadan, OR Oyo Stase 10001
Nigeria

Aviral Kumar Tiwari

Indian Institute of Management Bodh Gaya ( email )

Uruvela, Prabandh Vihar, Bodh Gaya
Bodh Gaya, 824234
India

Emmanuel Joel Aikins Abakah

University of Ghana - University of Ghana Business School (UGBS) ( email )

Volta Rd
Accra
Ghana

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