The price volatility of natural resource commodity and global economic policy uncertainty: Evidence from US economy

Abstract

Since the beginning of the 21st century, natural disasters and global economic shocks have affected economies in various aspects. This study investigates the causal relationship between the price volatility of natural resource commodity and global economic policy uncertainty in the US by using monthly data for the period of November 01, 2007–May 01, 2021. The wavelet power spectrum and wavelet coherence approaches are employed and the causal association is observed. In addition, the estimated results reveal that economic policy uncertainty and the price volatility of natural resource are more vulnerable than industrial production in the selected time span. Furthermore, the wavelet coherence illustrates a bidirectional causal association among global economic policy uncertainty, the price volatility of natural resource commodity and industrial production. However, a one-way causal association is observed running from industrial production to the price volatility of natural resource commodity. Moreover, the frequency domain causality validates the variables' short-run, medium-run, and long-run causal factors. The empirical findings offer several prominent policy implications which could be efficient from the long-run policy perspective.