The Time-Frequency Connectedness Among Carbon, Traditional/New Energy and Material Markets of China in Pre and Post-COVID-19 Outbreak Period

Abstract

The paper studies static and dynamic connectedness among carbon, traditional (oil and coal) /new energy and material (iron, aluminum, cement and plastic) markets based on the Diebold Yilmaz (2012) method and the Barunik and Kˇrehlik (2018) method. Firstly, total connectedness is larger in short-term and enhanced after the COVID-19 outbreak. Secondly, material markets exhibit higher explanatory power. Especially, plastic price plays a leading role during the pandemic crisis according to the networks. Thirdly, the spillover of China’s carbon markets after the outbreak is about twice as great as that of pre-COVID-19 outbreak. It has positive net connectedness in the medium- and long-term. China’s carbon markets’ spillover is relatively small and mainly contributes to new energy. Finally, the results of rolling window demonstrate that the positive and negative values of time-varying total and net connectedness peak due to economic shocks or global emergencies. High connectedness with longer duration may be caused by sudden emergency instead of anticipated events. These findings can offer great benefits for policymakers, high-carbon businesses and investors to make appropriate strategies with heterogeneous frequency horizons.