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The Impact of Oil Shocks on Systemic Risk of the Commodity Markets

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Abstract

This study examines the influence of oil shocks on systemic risk spillover among the commodity markets. Specifically, this paper uses the DCC-GARCH approach combined with the TVP-VAR model to calculate risk connectedness and the GARCH-MIDAS model to explore how oil shocks from different sources affect the risk spillover effects among the commodity markets. The results are the following: First, there are significant risk spillovers among the commodity markets with important time-varying characteristics and with sharp changes in times of crisis. The industrial metals, agriculture, precious metals, and light energy commodity markets are risk recipients, and the energy and livestock commodity markets are risk exporters. Second, oil price shocks, particularly oil aggregate demand shocks, prominently affect the total risk connectedness among the commodity markets. In particular, the impact on the net risk spillover effect of different commodity market differs.

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Authors and Affiliations

  1. College of Mathematics and Statistics, Hunan Provincial Key Laboratory of Mathematical Modeling and Analysis in Engineering, Changsha University of Science and Technology, Changsha, 410114, China

    Zhifeng Dai & Tong Wu

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  1. Zhifeng Dai
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  2. Tong Wu
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Correspondence to Tong Wu.

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The authors declare no conflict of interest.

Additional information

This research was supported by the National Natural Science Foundation of China under Grant Nos. 71771030 and 72131011, and Ministry of Education Humanities and Social Sciences Project under Grant No. 22YJA790011.

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Dai, Z., Wu, T. The Impact of Oil Shocks on Systemic Risk of the Commodity Markets. J Syst Sci Complex (2024). https://doi.org/10.1007/s11424-024-3224-y

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  • DOI: https://doi.org/10.1007/s11424-024-3224-y

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