The price relationship between main-byproduct metals from a multiscale nonlinear Granger causality perspective

Abstract

Basing on the relationship of joint production, we take lead-bismuth, lead-selenium, zinc-cadmium, and zinc-germanium as examples to study the nonlinear Granger causal relationship between the prices of main-byproduct metal pairs. The price relationship between the main metal and byproduct metal is nonlinear and varies with the time scales. Therefore, we use an Ensemble Empirical Modal Decomposition method (EEMD) to break down the price series of the main metals and byproduct metals into different frequency bands, and then test these different frequency bands for nonlinear Granger causality. The results show that a two-way nonlinear Granger causal relationship exists between the prices of the main metals and byproduct metals, and this nonlinear Granger causal relationship is reflected primarily in the short- and medium-term time scales. Moreover, the effect of the main metal price on the price of the byproduct metal is not as significant as previously thought, and the influence of the byproduct metal price on the main metal price has been previously underestimated.