Dynamic dependence between main-byproduct metals and the role of clean energy market

Abstract

This paper explores the dynamic dependence between the prices of main-byproduct metal pairs by applying the time-varying parameter vector autoregression (TVP-VAR) modelling. The novel insights into the effect of clean energy market on the connectedness of main-byproduct metal markets are also provided via Granger causality tests and nonparametric causality-in-quantiles approach. Empirical results indicate the time-varying nature of the spillover between main-byproduct metals and the overlooked spillover effect from the byproduct metal market. The significant causal effect of the clean energy market on the co-movement between main-byproduct metal markets implies that the clean energy market and main-byproduct metal markets are closely linked. Particularly, the wind energy market has a stronger effect than the solar energy market on the total spillover of the main-byproduct metal pairs. Furthermore, a battery of linear and nonlinear causality tests suggests the heterogeneous effect of the clean energy market, which causes a linear impact on the spillover from main metal to byproduct metal market, while brings a nonlinear causal effect on the spillover from byproduct metal to main metal market. Our findings highlight the significant role of clean energy market in the connectedness between main-byproduct metal markets.