Abstract
Based on the background of continuous increasing external economic uncertainty, this paper builds GARCH-MIDAS model to explore the volatility of copper price caused by global economic policy uncertainty in copper supply chain finance and analyzes the changes of refined copper supply and demand caused by this volatility. It is found that the increases of economic policy uncertainty will enhance the long- term volatility of copper. Moreover, the violent fluctuation of copper price caused by the impact of powerful economic policy uncertainty will weaken the demand confidence of refined copper market and lead to the phenomenon of oversupply. On the contrary, the moderate fluctuation of copper price due to the impact of weak economic policy uncertainty will boost the demand confidence of refined copper market and lead to the phenomenon of short supply.
Highlights
With uncertain events increase, such as trade barriers, Brexit and geopolitics, the economic growth of major global economies continued to slow down
This paper focuses on copper supply chain that can best reflect the macroeconomic environment and takes global economic policy uncertainty (GEPU) as an exogenous variable to empirically analyze the impact of GEPU on the copper supply chain
This paper explores the fluctuation of copper future price in the copper supply chain finance caused by global economic policy and analyzes the changes of refined copper supply and demand in the copper supply chain caused by this fluctuation
Summary
With uncertain events increase, such as trade barriers, Brexit and geopolitics, the economic growth of major global economies continued to slow down. The turbulent economic environment will disrupt the structure of global value chain and bring adverse spillover effects. The core enterprises in the supply chain use their good reputation to obtain loans from banks for small and medium-sized enterprises. The core enterprises may pledge goods and extend the delivery period of loans to alleviate the financial difficulties of small and medium-sized enterprises. The deepening of globalization promotes the deep development of supply chain and the optimization of the internal structure of supply chain, but at the same time, the bad external environment is bound to bring risks to all participants in the supply chain. With the increasingly severe international situation, it is necessary to understand how the external economic environment affects the supply chain. This paper focuses on how economic policy uncertainty affects copper supply chain finance
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