In recent years, there has been growing interest in the market interactions between carbon (or clean/renewable energy) and traditional fossil energy such as coal and oil, but few studies have discussed their dynamic volatility spillover and time-varying correlation. To investigate these issues, we used the weekly data of the European Union carbon emission allowance (EUA) futures, biofuel and Brent oil prices from 25 October 2009 to 5 July 2020. We employed the vector autoregressive-generalized autoregressive conditional heteroscedasticity (VAR-GARCH) model with the Baba, Engle, Kraft and Krone (BEKK) specification. Our main findings are summarized as follows: First, we identified the sudden changes and the volatility persistence in the EUA, biofuel, and Brent oil markets, and also confirmed that the volatility of the markets has changed significantly over time. Second, we found a weak volatility spillover effect among the three markets, and a strong spillover effect between the EUA and Brent oil markets. In particular, the effect of volatility spillover from the Brent oil market to the EUA market was the strongest than the other cases. Lastly, in financial market, by holding the EUA and energy sources together as assets, investors can effectively hedge their investment risk. The possibility of hedging is more pronounced between the EUA and biofuel markets.

This paper investigates the relationship between international reserves changes and foreign exchange rate movements for five Far Eastern countries (China, Japan, Taiwan, Hong Kong, and Korea) from January 1997 to May 2020. We use the quantile Granger causality test and the quantile autoregressive model to capture the monetary authorities’ motivations for intervention. The primary results of this study are as follows. First, in China and Hong Kong, we capture the mercantilists’ motive of accumulating their international reserves for the purpose of responding to the appreciation of currencies. Relatively speaking, the monetary authorities’ motivation for precautionary stabilizing their currencies is high in Korea and Japan. Second, we identify the asymmetric causal relationship between the variables. Considering the causal relationship with significant regression coefficients, these characteristics are found to be more evident in all countries. Last, we confirm the properties of the quantile- and tail-dependent relationship between the variables. In particular, Korea has a relatively stronger tail-dependence than other countries. That is, the causal relationship between the Korean foreign exchange reserves and the exchange rate is stronger at the rapid fluctuations of the variables, and this relationship is weakened at the moderate fluctuations of them.

With the rapid spread of carbon trading in the global economy, the interactions of prices between carbon (or clean/renewable energy) and traditional fossil energies such as coal and oil have raised growing attention, but little research have discussed their dynamic volatility spillover and time-varying correlation. The purpose of this study is to investigate these issues, for the weekly data of EUA futures, Biofuel and Brent oil prices from 25 October 2009 to 5 July 2020. We employ the VAR-GARCH model with the BEKK specification. Our results are summarized as follows. At first, we identified the sudden changes and the volatility persistence in the three markets, and also confirmed that the volatility of the markets has changed significantly over time. Secondly, we find that there are a weak volatility spillover effect among the three markets, while a strong spillover effect between the EUA and Brent oil markets. Lastly, in financial markets, the EUA can be used as a hedging portfolio for the Biofuel and Brent oil markets. These results can help investors to well compose their portfolios and manage their investment risks, and help potential pollutant emission sources to join in carbon market in a cost-effective way.