Intersectoral systemic risk spillovers between energy and agriculture under the financial and COVID-19 crises

Zhu, Bin; Lin, Renda; Deng, Yuanyue; Chen, Pingshe; Chevallier, Julien

doi:10.1016/j.econmod.2021.105651

Cited by 31 publications

(8 citation statements)

References 61 publications

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“…For industrial metals, volatility in TIN and COP returns are passed on to GOL. In case of agriculture sector, SBOL and CRN are connected to HOL and CTN to GOL (Zhu et al, 2021 ). Therefore, during COVID-19 crisis period, commodities like Silver, Palladium, Tin, Copper, Soyabean Oil, Corn and Cotton transmit their volatility to different energy commodities.…”

Section: Resultsmentioning

confidence: 99%

Modelling systemic risk of energy and non-energy commodity markets during the COVID-19 pandemic

et al. 2022

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COVID-19 led restrictions make it imperative to study how pandemic affects the systemic risk profile of global commodities network. Therefore, we investigate the systemic risk profile of global commodities network as represented by energy and nonenergy commodity markets (precious metals, industrial metals, and agriculture) in pre- and post-crisis period. We use neural network quantile regression approach of Keilbar and Wang (Empir Econ 62:1–26, 2021) using daily data for the period 01 January 2018–27 October 2021. The findings suggest that at the onset of COVID-19, the two firm-specific risk measures namely value at risk and conditional value of risk explode pointing to increasing systemic risk in COVID-19 period. The risk spillover network analysis reveals moderate to high lower tail connectedness of commodities within each sector and low tail connectedness of energy commodities with the other sectors for both pre- and post-COVID-19 periods. The Systemic Network Risk Index reveals an abrupt increase in systemic risk at the start of pandemic, followed by gradual stabilization. We rank commodities in terms of systemic fragility index and observe that in post COVID-19 period, gold, silver, copper, and zinc are the most fragile commodities while wheat and sugar are the least fragile commodities. We use Systemic Hazard Index to rank commodities with respect to their risk contribution to global commodities network. During post COVID-19 period, the energy commodities (except natural gas) contribute most to the systemic risk. Our study has important implications for policymakers and the investment industry.

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Section: Resultsmentioning

confidence: 99%

Modelling systemic risk of energy and non-energy commodity markets during the COVID-19 pandemic

et al. 2022

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“…Employing a tail-driven network to study dependence, the authors found that the banking sector is the principal risk-spreader in the Chinese economy. Similarly, Zhu et al (2021) showed how sector-induced contagion effects propagate during economic and financial crises. Their findings, obtained using time-varying Copulas, reveal the presence of significant systemic risk spillovers between the energy and agriculture sectors.…”

Section: Literature Reviewmentioning

confidence: 99%

South African Banks’ Cross-Border Systemic Risk Exposure: An Application of the GAS Copula Marginal Expected Shortfall

Manguzvane

Mwamba

2022

IJFS

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Systemic susceptibility highlights the extent to which a banking sector is sensitive to negative shocks. Policymakers and regulators’ objective is to avoid financial crises, and even though they can somewhat control local conditions, internationally transmitted crises are difficult to tackle. This paper analyzes the cross-border systemic risk exposure of South African banks. The marginal expected shortfall is employed with data covering 2002 to 2020. The results show that South African banks are significantly prone to crises emanating beyond the country’s borders. The findings confirm the existence of a significant transfer of risk from other countries to South Africa’s banking sector. Moreover, the amount of foreign capital invested in a bank is found to be a strong predictor of a bank’s international exposure. Knowledge of the linkages that the banking system has with other countries, and how cross-border exposures endanger banks, will form a basis for regulations that ensure a safer financial system.

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“…Financialization and speculation might have played some role in the dynamics of price and risk only in food commodity markets during the increase in oil price in 2007-2008(Fernández-Avilés et al, 2020. Zhu et al (2021) showed that bioethanol production (physical channel) and financialization of commodities (financial channel) mainly relate to the shock spillovers in energy-agricultural pairs. The economic structure and uncertain events (crises) determine the behavior and relationship between food and oil markets (Chen et al, 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Zhu et al. (2021) showed that bioethanol production (physical channel) and financialization of commodities (financial channel) mainly relate to the shock spillovers in energy–agricultural pairs. The economic structure and uncertain events (crises) determine the behavior and relationship between food and oil markets (Chen et al., 2020).…”

Section: Literature Reviewmentioning

confidence: 99%

Dynamic correlation between crude oil and agricultural futures markets

Chen

Yan

Kang

2022

Review Development Economics

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In recent years, the relationship between agricultural commodities and crude oil has become increasingly close with the promotion of biofuel policies. This study examines the dynamic correlation between global crude oil futures and seven agricultural commodity futures by applying the consistent dynamic conditional correlation and dynamic equicorrelation models. The empirical results show that the dynamic correlation between the global crude oil futures market and China's agricultural futures market is weak compared to the global agricultural futures market. In particular, soybean oil has the strongest correlation with crude oil, while Dalian Commodity Exchange (DCE) corn and Zhengzhou Commodity Exchange wheat have the weakest correlation with crude oil. There is an indirect linkage between crude oil futures and DCE soybean meal and DCE soybean oil. Moreover, the dynamic correlation between crude oil and agricultural commodities increased during the financial crisis, the novel coronavirus (COVID‐19) epidemic, and the crude oil crash crisis. Brent crude oil has a stronger co‐movement with China's agricultural commodities than West Texas Intermediate crude oil and can better hedge the risk of agricultural commodities. The findings of this study provide some insights into the contagion risk management of crude oil futures and agricultural futures markets.

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Intersectoral systemic risk spillovers between energy and agriculture under the financial and COVID-19 crises

Cited by 31 publications

References 61 publications

Modelling systemic risk of energy and non-energy commodity markets during the COVID-19 pandemic

Modelling systemic risk of energy and non-energy commodity markets during the COVID-19 pandemic

South African Banks’ Cross-Border Systemic Risk Exposure: An Application of the GAS Copula Marginal Expected Shortfall

Dynamic correlation between crude oil and agricultural futures markets

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